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KOM (2025) 0202
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EUROPEAN

COMMISSION

Brussels, 4.6.2025

SWD(2025) 202 final

COMMISSION STAFF WORKING DOCUMENT

2025 Country Report – Bulgaria

Accompanying the document

Recommendation for a COUNCIL RECOMMENDATION

on the economic, social, employment, structural and budgetary policies of Bulgaria

{COM(2025) 202 final}

kom (2025) 0202 - Ingen titel

kom (2025) 0202 - Ingen titel

ECONOMIC DEVELOPMENTS AND KEY POLICY

CHALLENGES

Consumption-led growth amid

growth in real wages in a tight

labour market and rising house

prices

Economic growth accelerated to 2.8% in

2024, driven by private consumption.

Strong nominal income expansion in 2024 was

underpinned by a continued upward trend in

aggregate employment, wages and increased

social transfers. Combined with a decline in

inflation, this trend led to growth in both real

disposable income and private consumption,

further supported by strong lending activity.

Graph 1.1:

HICP and real GDP growth with

contributions

pps

forecast

(1)

broad-based in terms of product categories. In

terms of destination countries, sharp declines

in exports to some countries were registered.

Investment contracted after strong

expansion in the previous years.

Investment in 2022 and 2023 held up well.

However, it declined in 2024 by 1.1% due to

lower public spending, mitigated somewhat by

roughly constant private sector borrowing.

Firms accumulated more inventory in the form

of unfinished production and goods in 2024, in

parallel with the country’s increase in imports

and a decline in finished construction. Real

GDP growth is forecast to slow down to 2% in

2025 and 2.1% in 2026, due to precautionary

savings and subdued external demand in the

context of high uncertainty (see Graph 1.1).

The labour market continued to perform

well overall, although labour cost

pressures have been significant.

The

unemployment rate has been at historically

low levels, slightly above 4% since 2022, amid

increasing rates of both labour-force

participation and employment. The tightness

of the labour market, combined with the

increase in the minimum wage at the

beginning of 2024 has pushed up aggregate

nominal wages well beyond inflation and

productivity gains. Nevertheless, aggregate

wage growth decelerated throughout 2024.

Manufacturing firms optimised production

costs

through

labour

shedding

accommodate the sizeable wage increases in

the sector. Buoyant domestic demand led to

intensified hiring and strong wage increases in

the services sector. Nevertheless, wages in key

service sectors (e.g., trade, transport and

hospitality) grew much more moderately in

2024. Domestic cost pressures in services

sectors that saw low-productivity gains in

2024 contributed to higher value-added

deflators in these sectors. Overall, economy-

wide unit labour costs have increased strongly,

although growth in unit labour costs

-2

-4

-6

Net exports

Priv. consumption

Inventories

HICP (y-o-y%)

Investment

Gov. consumption

Real GDP (y-o-y%)

(1) Commission Spring 2025 Forecast

Source:

European Commission 2025

Weak external demand continued to

constrain export growth.

In 2024, exports

of goods and services contracted in both

nominal and real terms, while the country’s

terms of trade deteriorated. The decline in

exports was most pronounced in cereals

(owing to a weak harvest) and otherwise

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significantly decelerated in 2024. Wage

increases in the public sector were also an

important factor in the strong aggregate wage

dynamics in 2023 and 2024.

The high inflation has abated further in

2024 but increases in taxes and

regulated prices have led to inflation

picking up again at the beginning of

2025.

All components of the consumer basket

(measured by HICP) saw considerable

disinflation in 2024. Services-sector inflation

also slowed down, reflecting the lower

inflation in key inputs, such as food and fuel.

Annual HICP inflation, however, rose from

2.1% in December 2024 to 3.8% in January

2025 for several reasons. After the expiration

of VAT reductions at the end of 2024 for

bread, flours and catering services, prices in

these categories increased. Other items in the

food basket also registered high month-on-

month increases, reflecting either international

commodity prices (coffee, edible oils) or higher

excise duties (cigarettes). Electricity and gas

prices for households also increased, reflecting

regional market conditions. Other utilities

prices, like water supply, sewerage and waste

collection also increased in January 2025.

Prices of telecommunication services reported

an increase above expectations. In parallel,

unit labour cost growth slowed in 2024 in

favour of the deceleration in services inflation.

As the hikes at the beginning of the year were

related mostly to administrative decisions,

they are regarded as one-time events and

their effects are expected to wane toward the

end of the year. In addition, the increases were

partially offset in April by lowered hospital

fees, other administered prices and lower gas

and fuel prices. Overall, HICP inflation is

projected at 3.6% in 2025 and 1.8% in 2026

(see Graph 1.1).

House prices continue to grow in line with

average income growth.

House prices have

nearly doubled in the last decade. However,

these increases have been offset in line with

growing average incomes. Nevertheless, risks

for housing affordability could be elevated for

lower-income households. Furthermore, rising

prices and high demand for housing may be

linked with the low level of financial literacy in

the country (Annex 5). The growth of

households’ deposits remains strong. At the

same time, interest rates on new time deposits

offered by the largest banks as well as rates

on outstanding amounts of time deposits have

remained close to 0%, unlike the increase in

deposit rates observed in other Member States

during the ECB’s monetary tightening period.

Mortgages continue to grow amid very

low borrowing rates.

The value of new

housing loans increased by 43% in 2024, after

growing by 20% in 2023. This was supported

by very low lending rates, as banks continue to

have ample cheap liquidity from deposits.

Nevertheless, both the stock of mortgages and

the share of the population that has a

mortgage remain very low. In 2024,

Bulgaria’s

central bank imposed some borrower-based

limits on commercial banks. The limits appear

targeted at the low-income, higher-risk

borrowers that would be the first and hardest-

hit by adverse economic conditions (see Annex

5 for details).

Bulgaria is continuing its efforts to

integrate more within the EU.

Joining the

euro area remains a political priority of

Bulgaria,

and the government’s target date is

to join in 2026. In February 2025, Bulgaria

asked the Commission and the ECB for their

convergence assessments. On 1 January 2025,

Bulgaria and Romania became full members

of the Schengen Area. The country is also

working towards joining the Organisation for

Economic Cooperation and Development

(OECD) by implementing an action plan agreed

with the OECD.

Structural bottlenecks weigh on

growth potential

Moving ahead with important structural

reforms, including those in the recovery

and resilience plan, remains challenging.

Bulgaria has taken measures to improve its

institutional framework and the business

environment, notably in the four areas covered

by the post-entry ERM II commitments.

However, other important measures to

improve the business environment, reinforce

the rule of law and facilitate the green

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transition have faced significant delays. A

period of protracted political instability has

impeded a consistent policy approach to

implementing these measures, which remain

crucial

for

improving

the

country’s

competitiveness.

Aggregate labour productivity growth has

slowed down in the last couple of years.

For the economy to follow a higher economic

growth trajectory, it is necessary to adopt new

technologies and boost services with high

value added. This requires putting in place the

necessary enabling factors. Government

policies that provide the enabling conditions

(such as infrastructure, skilled workers, sound

institutions and an environment conducive to

do business and innovation) are necessary to

preserve and further increase

Bulgaria’s

competitiveness.

To become more competitive and

converge more quickly with its EU peers,

Bulgaria needs a dynamic business

sector, benefiting from fewer barriers, a

level playing field, and the rule of law.

Businesses in the country say that the most

significant hindrances to a better business

environment are corruption, frequent changes

in regulations, bureaucracy, and biased public

procurement (

). Regulatory barriers remain

higher in Bulgaria than in comparable

countries for lawyers, notaries, architects and

civil engineers (see Annex 4). In recent years,

supervisory and regulatory authorities have

operated with an expired mandate for

prolonged periods of time. Businesses have

consistently complained about the quality of

regulatory work (

) and the failure to ensure a

level playing field (

Enabling factors need to improve

to accelerate convergence with

Bulgaria’s EU peers

The

high

energy

intensity

and

greenhouse-gas emissions of Bulgarian

industry remain key obstacles for the

modernisation of some sectors.

Heavy

industries in the country, such as metals and

chemicals industries, have caused increase in

emissions since 2017, even as average EU

emissions have dropped. Transport remains

the sector with the greatest emissions.

Notably, emissions have increased by a third

since 2005 compared with a 5% drop EU-wide.

The uptake of clean mobility in the country is

low amid a lack of government incentives and

investments in the sector.

Investing in renewables could boost

competitiveness.

Investments in solar

installations slowed down in 2024, and

investment in wind installations has been

negligible for over a decade. Insufficient

storage and grid capacities act as a barrier to

the further roll-out of renewables and increase

price volatility.

Demographic trends and skills shortages

continue

hinder

Bulgaria’s

competitiveness.

Bulgaria lost 19.1% of its

working age population between 2011 and

2021. This was mainly due to natural decrease

of the population and migration outflows in

the early part of this period. Despite recent

positive net migration flows, labour force

continued to decrease as a result of the

shrinking and ageing population. The

population lacks basic digital skills. Efforts to

support up-skilling and re-skilling are ongoing,

but more efforts are needed to increase adult

participation in learning, an area in which the

country has the lowest ranking in the EU (see

Annex 12).

Disadvantaged groups are less likely to

find work, limiting their contribution to

economic output.

The share of young people

(15-29) neither in employment nor in

education nor in training is still high despite a

decrease recorded in recent years. Additionally,

( ) Bulgarian Industrial Association

–

2024 through the

eyes of the business.

(

) EIB Investment Survey 2022

–

EU overview.

(

) EC Rule of Law Report 2023, 2024.

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the gap in employment between persons with

and without disabilities is much larger than in

other Member States. Moreover, less than half

of Roma are in some form of employment

(see Annex 10).

Despite

some

improvements,

the

education system fails to prepare

students for successful entry into the

labour market.

According to the latest PISA

test results, about half of 15-year-old

students lack basic numerical and reading

competences. The problem is even more

pronounced

among

students

from

disadvantaged

backgrounds.

This

also

translates into higher education, where

participation is low with the share of

graduates still below the EU average (see

Annex 12).

Regional disparities remain high.

In terms

of GDP per capita, the region that includes the

capital Sofia stands at 97% of the EU average

compared with 40-56% in the other regions.

Such disparities include gaps in labour

productivity, demographics, education and

trainings, employment, activity rates, transport

and other infrastructure, competitiveness and

research and innovation. Those disparities are

especially evident in the north of the country.

In addition, the lower administrative capacity

in some regions further impairs their ability to

absorb funds and deliver public services and

policies (see Annex 17).

The labour market is also characterised

significant

regional

disparities.

According to 2024 data, employment rates

vary significantly between urban and rural

areas, at 81.1% and 68.5% respectively.

Box 1:

UN Sustainable Development Goals (SDGs)

Bulgaria continues to improve in most indicators related to productivity (SDGs 4, 8 9)

and fairness (SDGs 1, 3, 5, 7 and 10) but still needs to catch up with the EU on all

indicators.

The gap between Bulgaria and the EU average is largest on the indicators for quality

education (SDG 4), in particular, in adult learning and the share of low-achieving 15-year-olds in

mathematics.

The country has almost reached the EU average on affordable and clean energy (SDG 3) and

clean water and sanitation (SDG 6). Despite some progress on indicators for peace, justice and

strong institutions (SDG 16), more efforts are needed to converge with the EU in the area of

macroeconomic stability (SDGs 8 and 16).

Regional disparities and inequality

remain high

Bulgaria has long-standing challenges in

all areas of the social sphere,

such as

poverty, social exclusion, inequality, healthcare

and regional disparities.

Income inequality is decreasing but

remains among the highest in the EU.

Income inequality is also uneven across

regions. Another persistent challenge is

insufficient access to long-term care. Some

groups continue to be left behind, especially

Roma, but also young people and people with

disabilities (see Annex 11).

Employment rates also vary greatly across

regions, with the highest employment rate in

the southern region of Bulgaria (home to the

capital city of Sofia) at 79.9%, compared to

the north-western region, bordering Romania,

where the employment rate stood at 69.3%.

Public finance developments are

marked by expenditure increases

not matched by equally stable

revenues

The general government deficit increased

to 3% of GDP in 2024.

Recent reforms have

helped to improve the adequacy of pensions.

As a result, increases in spending are expected

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until 2027. Public sector salaries grew in part

due to the higher minimum wage, and in part

due to additional increases in some areas,

such as for education staff. Further increases

in spending came from an increase in social

benefits. In 2024, these spending pressures

were not accompanied by fully compensatory

measures. Revenues were supported through

measures to strengthen revenue collection and

fight tax evasion and avoidance.

kom (2025) 0202 - Ingen titel

Box 2:

Barriers to private and public investment

Private investment in Bulgaria has consistently been lower than what is needed to

ensure fast economic convergence with its EU peers and keep up with technological

progress.

This has been a result of political instability, the lack of a level playing field, and the

slow uptake of clean-energy technologies, especially in energy-intensive industries and transport.

Income taxes for both businesses and employees are low, and the overall tax burden (including

all social contributions) is relatively attractive for investors. Nevertheless, several main barriers

limit private investment, the three most significant of which are set out in the bullet points

below.

•

High regulatory barriers, frequently changing regulations and bureaucracy

make the

investment process difficult.

•

A widespread perception among businesses of corruption

erodes trust and makes it

less attractive to do business in the country.

•

The slow deployment of renewables and decarbonisation measures,

including those

from the RRP, hold back the modernisation of transport and industry.

Bulgaria has a track record of disciplined public finances, but public investment

management needs improvement.

Recent reforms have improved the planning of public

investment, including via the recently introduced investment programme for nationally financed

investments and capital budget ceilings (Annex 1). Nevertheless, barriers to efficient public-

investment spending remain. Three of the most significant of these barriers are set out below.

•

A lack of objective value-for-money assessments of projects.

Although criteria to

prioritise ongoing projects against new projects are in place, standardised methods to assess

benefits and costs are missing (Annex 1).

•

A lack of competitive and effective public procurement combined with difficulty in

implementing investments.

Implementing investments has been difficult and significantly

delayed due to: (i) slow procurement; (ii) many

–

often successful

–

complaints by candidates;

and (iii) the resulting lack of time for implementation. A reform in the plan to reduce some of

those procurement issues is being implemented.

•

The limited use of ex post reviews.

Bulgaria does not carry out ex post reviews

systematically, thereby limiting the possibility of learning from past mistakes and improving

planning and implementation in the future.

The implementation of Bulgaria’s RRP is significantly delayed.

At present, Bulgaria has

fulfilled 23% of the milestones and targets in its RRP. In addition to the challenges above, the

main bottlenecks to EU funds implementation are delays in procurement, political instability,

ineffective governance and insufficient administrative capacity. In April 2025, Bulgaria submitted

a comprehensive revision of its RRP, including a REPowerEU chapter, with a view to bringing the

plan back on track and achieving its ambitious objectives.

It remains important to accelerate the implementation of cohesion policy programmes. The mid-

term review offers opportunities to speed up progress and better address EU strategic priorities

related to competitiveness, defence, housing, water resilience and the energy transition.

While

Bulgaria has signalled interest in leveraging the Strategic Technologies for Europe Platform under

cohesion policy, Bulgaria can further support the development or manufacturing of critical technologies in the

areas of digital and deep tech, clean and resource efficient technologies, and biotechnologies.

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The general government deficit is set to

remain at a level close to 3% of GDP

going forward.

Bulgaria only adopted its

2025 budget on 21 March 2025. The budget

targets a deficit of 2.9% of GDP in 2025,

consistent with the country’s medium-term

fiscal structural plan. In its latest forecast, the

Ministry of Finance expects a deficit of 2.2 %

in 2026, 4.1 % in 2027 and 1.9 % of GDP in

2028. The statistical recording of past military

purchases will have an impact of 0.5% of GDP

in 2025 and 1.6 of GDP in 2027. According to

the

Commission’s Spring forecast, the deficit is

expected to amount to 2.8% of GDP in 2025

and 2.8% of GDP in 2026. The planned budget

balance for 2025 mainly relies on the

revenue-side on taking all of the profits of

state-owned companies and further measures

against tax evasion and avoidance. Revenue is

further supported by: (i) increases in excise

duties on tobacco products; (ii) the

normalisation of several VAT rates; and (iii)

increases in maximum and minimum insurable

income. On the expenditure side, public sector

salaries are expected to continue to grow, in

line with recent trends, with especially marked

increases in the defence sector. Public

investment is set to increase, in line with the

efforts to advance the implementation of the

RRP and also driven by strong increases in

defence investment due to the accrual of

planned deliveries of military equipment. The

general government debt-to-GDP ratio is

forecast to increase from 24.1% in 2024 to

25.1% in 2025 and further up to 27.1% by

2026

Net expenditure is expected to grow in

line with the commitments.

In 2024, net

expenditure (

) in Bulgaria grew by 10.4% (see

Annex 1). This increase is mainly driven by

increases in pensions and public sector

salaries. The revenue-increasing impact of

discretionary revenue measures, notably on

(

) Net expenditure is defined in Article 2(2) of Regulation

(EU) 2024/1263 as government expenditure net of (i)

interest expenditure, (ii) discretionary revenue

measures, (iii) expenditure on programmes of the Union

fully matched by revenue from Union funds, (iv)

national expenditure on co-financing of programmes

funded by the Union, (v) cyclical elements of

unemployment benefit expenditure, and (vi) one-off

and other temporary measures.

fighting tax collection and avoidance, as well

as one-off expenditure to settle outstanding

liabilities worth 0.5% of GDP were netted from

the expenditure. In 2025, net expenditure is

forecast by the Commission to grow by 9.2%,

which is above the maximum growth rate as

reported by Bulgaria in its medium-term

fiscal-structural plan (

). This is due to the

combination of expenditure increases due to

pensions and public sector salaries and of a

marked increase in expenditure on defence,

including investment, as well as to higher

public investment. The one-off treatment of

the settlement in 2024 also contributes to the

growth, as it creates a lower starting base in

2024.

Based

current

projections

for defence spending, the projected deviation

in 2025 is allowed under the conditions of the

national escape clause that Bulgaria requested

to activate on 2 May 2025.

Public investment management remains

inconsistent and lacks predictability, and

this negatively affects businesses.

The

IMF (2022) estimates that Bulgaria's public

capital stock levels are among the lowest in

the EU, underlining the need to more

efficiently allocate public resources for priority

areas (

). There are significant discrepancies

between plans and actual spending on public

investment, and underspending on capital

expenditure execution appears to be structural.

Capital expenditure serves as an implicit

budget buffer, but this under-execution also

suggests potential issues in the capacity of

public agencies to implement investment

projects within planned timelines. This is

compounded by weaknesses in capital

budgeting, including a rigid budgeting rule that

prevents state bodies from carrying forward

unspent funds from year to year. This rigid

budgeting rule hinders long-term planning and

(

) The medium-term plan has been positively assessment

by the Commission (Commission recommendation for a

Council recommendation endorsing the national

medium-term fiscal-structural plan of Bulgaria,

COM/2025/238 final).

(

)

Hallaert, J. J., and K. Primus (2022). ‘Strengthening

Public Expenditure Efficiency Investment and Social

Spending in Bulgaria’, IMF,

Strengthening Public

Expenditure Efficiency: Investment and Social Spending

in Bulgaria.

kom (2025) 0202 - Ingen titel

creates inefficiencies (

). Bulgaria has started

a process to improve its public-investment

management, including by setting up a

dedicated fund in the 2024 State Budget Law.

Nevertheless, weaknesses in this area remain

(see Box 2).

(

)

OECD (2023), ‘Public Investment in Bulgaria: Planning

and Delivering Infrastructure’, OECD Public Governance

Reviews, OECD Publishing, Paris,

https://doi.org/10.1787/b73ef3b4-en.

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INNOVATION, BUSINESS ENVIRONMENT AND

PRODUCTIVITY

The role of research & innovation

in the competitiveness landscape

Bulgaria has one of the lowest levels in

the EU of public and private R&D

investment.

According to the 2024 European

Innovation Scoreboard, Bulgaria's innovation

performance has increased over time, but

more slowly than that of the EU, and Bulgaria

remains only an

‘emerging

innovator’. Both

public and private R&D investment remain at

very low levels. In 2023, public R&D

expenditure was 0.28% of GDP compared with

0.72% in the EU. Private R&D expenditure was

0.51% of GDP compared with 1.49% in the EU.

Furthermore, innovation output in Bulgaria is

low, as evidenced by the

country’s

low patent

intensity and its below-EU-average number of

scientific publications and citations (see Annex

3).

Bulgaria’s

public research landscape is

highly fragmented, hindering innovation

and competitiveness.

Bulgaria has many

higher education institutions and research

organisations, making it difficult to coordinate

and implement effective R&D policies.

Bulgaria's low levels of R&D expenditure are

exacerbated by: (i) a lack of coordination at

the government level; and (ii) the practice of

spreading limited funds across many higher

education

institutions

and

research

organisations. This also prevents researchers

from achieving a critical mass, ultimately

impacting the quality of the public science

base (

), which is the lowest in the EU.

(

) As measured in scientific publications of the country

within the top 10% most cited scientific publications

worldwide as a percentage of

the country’s

total

scientific publications. This was 3.3 (2021) in Bulgaria

vs 9.6 (2023) in the EU (see Annex 3).

Academia-business links in Bulgaria are

limited.

Science-business cooperation as

reflected in the share of public-private

scientific co-publications is well below the EU

average. Progress is also hampered by the lack

of incentives for cooperation between

academia

and

business

and

the

underdeveloped

technology-transfer

ecosystem. As part of the reforms under the

Recovery and Resilience Facility (RRF), the

Research and Innovation Act adopted in 2024

lays down plans for the creation of a

government advisory council on research and

innovation. This advisory council aims to

promote links between academia and

business. Improving those links could help to

further close the innovation gap in certain

areas of applied research (see Annex 3).

The uptake of digital technologies in

Bulgaria is very low.

In 2024, only half of

the country’s SMEs had at least a basic level

of digital intensity, far below the EU average

of 73% and putting it last among EU Member

States. This further exacerbates

Bulgaria’s

innovation challenges. The RRF is supporting

the deployment of digital technologies in SMEs

and the improvement of their readiness for

the subsequent adoption of

‘Industry

4.0’

technologies (see Annex 3).

Business environment

–

administrative burden and

simplification

Bulgaria’s public procurement system

lacks competition.

Bulgaria has made some

progress in reforming its regulatory framework

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on public procurement. Nevertheless, as part

of the reforms under the RRF, the high (and

increasing) share of procurement procedures

with a single bidder (36% in 2024) and the

share of negotiated procedures without prior

publication remain a concern (see Annex 4).

Corruption risks in public procurement remain

high. This results in businesses being deterred

from participation, citing biased conditions and

evaluations. The World Bank (2023) estimates

that addressing weaknesses in public

procurement processes, including non-

competitive practices and corruption, could

potentially save about 5.3% of the total value

of contracts, or approximately BGN 1.3 billion

(

The perception among businesses that

corruption is widespread remains high.

88% of companies consider that corruption is

widespread (against an EU average of 65%)

and 57% consider that corruption is a problem

when doing business (EU average: 36%) (

Moreover, only 14% of companies believe that

people and businesses caught bribing a senior

official are appropriately punished (against an

EU average of 31%) (

). Under the RRF,

Bulgaria has planned a reform to further

combat corruption at all levels of public

administration and in the justice and

prosecution systems. Full implementation of

this reform would help address those issues

and improve corruption perceptions among

businesses. Bulgaria has also adopted

legislative amendments to put in place a

mechanism that would ensure the effective

accountability and criminal liability of the

Prosecutor General and their deputies. It

remains crucial for Bulgaria to continue these

efforts to fully finalise and implement the

reform.

Political

favouritism

public

procurement weighs on productivity and

(

)

World Bank (2023). Bulgaria - Public Finance Review.

The World Bank Group. Available:

World Bank

Document

(

)

See 2024 Rule of Law Report, country chapter on

Bulgaria, p. 15.

(

)

See 2024 Rule of Law Report, country chapter on

Bulgaria, p. 15.

competitiveness.

A recent World Bank study

(

) shows that politically connected companies

in Bulgaria are much more likely to win public

contracts, having preferential access to

uncompetitive tenders. This is shown to result

in lower productivity and employment growth

for those companies as well as higher

corporate profits. Addressing these issues

would help to support fair competition, the

efficient allocation of resources and,

ultimately, economic growth.

Administrative burden and regulatory

barriers in Bulgaria remain high.

According

to a national survey, businesses cited

bureaucracy as a major obstacle (60% of

surveyed businesses agreed), alongside

concerns

about

frequently

changing

regulations (47% agreed) and corruption (47%

agreed). These issues are reflected in low

rankings in the OECD's economy-wide indicator

on the regulation of product markets in the

sub-component

‘administrative

requirements

for limited liability companies’, where Bulgaria

ranks second lowest. This could be improved

by digitalising administrative processes and

reducing fees for starting a business.

Regulatory barriers remain higher in Bulgaria

than in comparable countries for lawyers,

notaries, architects and civil engineers. World

Bank indicators also highlight regulatory

barriers to trade and business operations (see

Annex 4).

Ensuring

adequate

administrative

capacity remains difficult.

Attracting

graduates is difficult with the share of civil

servants below 40 years-old falling

consistently over the last few years. Also,

nearly half of central government posts have

remained unfilled for over 6 months. Better

talent management, more training and

exchange programs could be considered to

increase the attractiveness of working in the

public administration.

Resource

limitations

and

political

influence reduce the quality of work of

(

)

Procuring Low Growth : The Impact of Political

Favoritism on Public Procurement and Firm Performance

in Bulgaria.

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regulatory bodies.

Most regulators rely on

state budget funding and their staff is bound

by the civil service code, making it more

difficult to attract talent and experts from the

regulated sectors. Moreover, there are

significant discrepancies between the levels of

salary across and within regulators (

), and

this affects the quality of regulation. Political

independence is often limited to the executive

branch, while the Parliament plays: (i) a direct

role in the work of regulatory bodies by

selecting and appointing regulators; and (ii) an

indirect role in the work of regulatory bodies

via the funding approved through the state

budget. As a result of the protracted political

instability in Bulgaria, many regulatory

authorities have operated

–

or continue to

operate

–

with an expired mandate. This

further contributes to regulatory and

administrative uncertainty

–

one of the main

obstacles cited by

Bulgaria’s

businesses (see

above). Existing legislation does not provide

for the independence of regulatory bodies

from market participants, including in sectors

like energy where state-owned companies play

a significant role (

Capital

‘deepening’,

or the overall increase in

capital available per worker, is making a low

contribution to labour productivity in Bulgaria.

To increase potential growth, it is important to

increase investment in productive sectors like

manufacturing

and

information

and

communication technologies. Among the

obstacles for investment that Bulgarian

companies point to, those that stand out as

being worse than the EU average are: (i) the

lack of skilled workers; (ii) uncertainty about

the future; and (iii) the

country’s

poor transport

infrastructure. Public policy could address

these obstacles via reforms and investments

and by reducing uncertainty through better

planning.

Increases in labour productivity are

largely due to the sectoral reallocation of

workers, and this needs to be sustained.

The sectors that have seen the highest growth

in productivity have increased their share in

the overall Bulgarian economy. These sectors

include financial services, information and

communication technology, manufacturing,

and trade. Companies in these sectors are also

able to attract more investment, often foreign,

which may also enable them to introduce new

technologies,

further

increasing

their

productivity. A more supportive business

environment could help speed up this process.

Labour-intensive

sectors,

including

construction, transport and agriculture have

lost market share and seen average labour

productivity stall

–

or even turn negative

–

over the past 20 years, as workers who are

able to increase their productivity relocate to

other sectors. Supporting a well-educated and

skilled labour force and providing suitable

conditions for the development of growth

industries would be crucial for productivity

growth.

How to boost productivity?

Productivity growth remains low despite

ongoing convergence with EU peers.

Growth in labour productivity in Bulgaria has

been consistently above the EU average in the

past decade, indicating ongoing convergence

with the EU. Nevertheless, growth in labour

productivity remains considerably below that

of peers, and was only half of that observed in

Croatia and Romania over the past three

years.

Investment stands out as a crucial factor

to boost productivity, but is limited in

Bulgaria due to structural obstacles.

(

) Analysis on the compensation of civil servants

https://jobs.government.bg/PJobs/publExtData.jsf?idPubl

=801

(

)

Assessing the independence and effectiveness of

national regulatory authorities in the field of energy -

Publications Office of the EU.

kom (2025) 0202 - Ingen titel

DECARBONISATION, ENERGY AFFORDABILITY AND

SUSTAINABILITY

Decarbonisation and sustainability

as a driver for competitiveness

The energy intensity and the energy-

related greenhouse-gas emissions of

manufacturing in Bulgaria remain high.

The energy intensity of manufacturing

decreased between 2017 and 2022 to 2.45

GWh/EUR of gross value added (GVA).

However, it remains significantly higher than

the EU average (1.05 GWh/EUR of GVA).

Between 2017 and 2022, greenhouse

emissions from industrial processes and

product use declined in Bulgaria more than in

the EU as a whole. At the same time, the

energy-related greenhouse-gas emissions of

Bulgaria’s

manufacturing industry increased

by 6% since 2017, while in the EU it decreased

by 11% in the same period (see Annex 7). The

production of metals and chemicals are key

contributors to this increase. Consistent efforts

to (i) support the decarbonisation of

manufacturing activities, particularly in

energy-intensive sectors, and (ii) reduce

energy consumption in industry, can be

expected to provide lasting environmental and

productivity gains to the economy.

The decarbonisation of energy production

is a significant challenge for Bulgaria,

and the regions of Stara Zagora,

Kyustendil and Pernik in particular.

These

three regions face significant socio-economic

challenges linked to the phasing out of coal

and reductions in greenhouse-gas emissions.

The measures planned under the Just

Transition Fund are expected to help tackle

some of these challenges. These measures

include: (i) the development of photovoltaic

parks with electrolysers and/or energy storage

systems; (ii) the establishment of industrial

parks for clean technologies; (iii) the creation

of hydrogen-based value chains; and (iv) the

use of green hydrogen. It is important that

Bulgaria keep the implementation of these

measures on track.

Efforts to enhance the integration of

Bulgarian firms in clean tech sectors

within the domestic ecosystem could

strengthen the country’s competitiveness.

Bulgarian firms in clean tech value chains

display limited integration within the domestic

economy and heavy reliance on foreign

suppliers, with only 25% of their supplier

network being domestic. At the same time,

Bulgarian firms have limited links in

international buyer and supplier networks, with

only overall 17 distinct supplier countries and

buyers from only 7 buyer countries (

). There

is therefore a potential for Bulgaria to

enhance its connectivity and weight within the

network by building a richer domestic

ecosystem. In addition to maintaining the

possibility for support under the Investment

Promotion Act, streamlining the permitting

processes could contribute to attracting

investments

Net-Zero

technologies

manufacturing.

Clean transport technologies display a

limited uptake in the Bulgarian market.

Transport represents the most emitting sector

in Bulgaria. Greenhouse-gas emissions from

road transport increased significantly between

2005 and 2023 in Bulgaria, even as they

decreased in the EU overall. In 2023, electricity

accounted for only a small share

of Bulgaria’s

final energy consumption in the transport

sector, and battery electric vehicles correspond

to only 0.2% of all passenger cars (

showing the limited market penetration of

electric mobility.

The country’s recharging

(

) Clean Tech Value Chains : Using Trade Data to Guide a

Complex Policy Space - Part Two,

World Bank.

(

) European Alternative Fuels Observatory.

kom (2025) 0202 - Ingen titel

network has rapidly grown, and further

expansion is expected. Further efforts to

increase grid capacity and ensure an even

geographical

distribution

charging

infrastructure have the potential to strengthen

the business case for the uptake of clean-

transport technologies in Bulgaria. Together

with measures to facilitate a modal shift to

less-polluting transport modes, this is

expected to help reduce transport-related

emissions and mitigate the economic impacts

of ETS2, the EU’s new emissions trading

system.

Bulgaria has the potential to make

competitiveness gains while contributing

to the EU’s

independence in the supply of

critical raw materials.

Bulgaria has deposits

of primary metals and other elements,

including some on the

EU’s

list of critical raw

materials. This means that it would be possible

for the country to help meet some of the EU’s

critical-raw-material

needs.

However,

Bulgaria’s implementation of the EU’s

Critical

Raw Materials Act is delayed. Timely delivery

of obligations under the Critical Raw Materials

Act (such as preparing a database on critical

raw materials and setting up an information

and project support unit) would provide an

opportunity for Bulgaria to: (i) strengthen its

position as a supplier of critical raw materials;

and (ii) further integrate in European value

chains. Furthermore, while Bulgaria’s level of

import dependency for raw materials is below

the EU average, enhancing (i) the

diversification

of Bulgaria’s supply sources for

imported raw materials (for example, iron and

non-alloy steel, aluminium and fertilisers) and

(ii) the circular use of materials, has the

potential to further reduce dependence on

single supply sources and strengthen the

resilience of EU value chains (see Annex 7).

Bulgaria records sizeable fossil fuel

subsidies with no planned phase-out

before 2030, representing 0.82% of

Bulgaria’s GDP

(see also Annex 8). Scaling

down and phasing out these subsidies is in line

with EU commitments and can contribute to

more fiscal space. Fossil fuel subsidies that

address neither energy poverty in a targeted

way nor respond to genuine energy security

concerns, hinder electrification and are not

crucial for industrial competitiveness could be

considered for priority phase-out. The

remaining fossil-fuel subsidies that are

particularly harmful from an economic and

environmental perspective include: (i) feed-in-

tariffs for combined heat and power (CPH) and

district heating; and (ii) the systematically

renewed order of the state for the purchase of

electricity from the Maritsa East II thermal

power plant.

Energy affordability and

competitiveness

High electricity prices pose a significant

challenge to Bulgaria’s economy and

undermine its competitiveness.

Bulgaria

does not yet benefit from liberalised electricity

markets, in particular a liberalised wholesale

market, in which demand and supply meet in

an unconstrained way. Such markets typically

allow for prices to reflect short-term

dispatching constraints, interconnector flows,

and flexible demand, so that the allocation of

electricity and associated revenues provides

the best incentives to all market participants.

In 2024 Bulgaria had the fourth-highest

wholesale electricity prices in the EU. The high

prices are driven partially by the continued

reliance on fossil fuels, with coal still

accounting for approximately 25% of

electricity generation, and the limited

availability of non-fossil flexibility (see Annex

8). Bulgaria has imposed a windfall tax on

electricity

generators’ and traders’ sales,

directing part of their revenues to the

Electricity System Security Fund (ESSF). This

tax on market revenues negatively affects

investment incentives, particularly for new RES

capacities. In addition, an electricity price cap

for non-household consumers (renewed in

2024) removes incentives for demand-side

flexibility

–

including energy efficiency

–

once

day-ahead prices exceed EUR 90 MWh. This

leads to increased peak demand, ultimately

driving up peak prices on the day-ahead

market. Moreover, the electricity price cap on

non-household consumers hinders the

development of long-term contracting. The

Bulgarian RRP includes an important reform to

liberalise electricity markets. For wholesale

kom (2025) 0202 - Ingen titel

markets, this reform aims to facilitate the

entry of new renewable energy sources,

including flexible assets such as storage

installations,

and

therefore

decrease

wholesale prices, ultimately improving the

competitiveness of the Bulgarian industry. On

the forthcoming liberalisation of the retail

market, Bulgaria has not yet launched

awareness campaigns, nor has it developed a

system to identify energy-poor and energy-

vulnerable households, which is essential for

the

implementation

targeted

compensation system. A liberalised retail

market will allow for the introduction of

competitive pricing determined on the basis of

market conditions.

There has been a slowdown in

installations of solar photovoltaics (PV),

while wind installations continue to

stagnate.

In 2024, Bulgaria added 1 GW of

new renewable energy capacity (mostly solar

PV), contributing to a 34% year-on-year

increase in total capacity, down from 67% in

2023 (see Annex 8). In more than a decade,

almost no new onshore wind capacity has

been installed in Bulgaria, due to complex and

lengthy permitting procedures. Furthermore,

Bulgaria’s estimated offshore wind potential

of 26 GW of fixed and floating installations

remains untapped, with a regulatory

framework, including a maritime spatial plan,

still missing (

). Wind installations can help

balance the country’s electricity system when

solar PV and hydropower generation is not

available, helping to reduce electricity prices.

Insufficient storage and grid capacity

create significant bottlenecks for scaling

up renewables and exacerbate price

fluctuations.

Bulgaria’s grid connection

capacity for renewable energy installations is

very limited, especially at the distribution level,

requiring additional investments in the

network for the continuous integration of

renewables. Furthermore, due to the lack of

sufficient short-term storage capacity and the

need to rely on expensive fossil-fuel

generators, Bulgaria experiences one of the

(

) 2020 Offshore wind technical potential in Bulgaria,

World Bank document.

highest wholesale price swings in the EU with

a daily, average variation in wholesale prices

of 185 EUR/MWh in 2024 (

). The delay in the

implementation of the RESTORE investment

under the RRP, which would add at least 3 000

MWh of usable energy storage capacity,

further prolongs this issue.

Climate adaptation and

preparedness

Bulgaria faces significant challenges in

climate adaptation, including a wide

climate-insurance coverage gap and

increased vulnerability to extreme

weather events such as heatwaves and

heavy rainfall.

The country has a medium

level of vulnerability to floods, and its water-

management system is under strain. It has the

highest rate of water loss in the EU (over

60%) and a deteriorating supply infrastructure

for public water. Furthermore, the compliance

rate with the Urban Wastewater Treatment

Directive is only 31%, and the country has not

yet reported its third river basin management

plan. Additionally, while the common

agricultural policy plan for Bulgaria includes

measures to improve water quality and

sustainable water use, current water quality in

Bulgaria is also a concern, with a high level of

nutrients leached from agriculture affecting

water status and causing the country’s failure

to meet the objectives of the Water

Framework Directive (Annex 9).

The country’s water resilience is further

compromised by its high vulnerability to

droughts, with 9.3% of ecosystems

suffering from severe drought in 2020.

The average impact of droughts on

ecosystems is significantly higher in Bulgaria

than in other EU countries. Bulgaria has

already taken some steps to address its

water-resilience challenges. For example,

Bulgaria has implemented measures to reduce

water losses, with a focus on improving the

(

) Key developments in European electricity and gas

markets,

ACER 2025 Monitoring Report.

kom (2025) 0202 - Ingen titel

efficiency of its water supply system. The

country has also reported its second flood-risk

management plan. However, further efforts to

address the significant investment gaps in

water management would be beneficial, with

an estimated EUR 439 million per year needed

to meet the requirements of the Water

Framework Directive and the Floods Directive.

Bulgaria faces significant economic risks

from

climate-related

events,

with

substantial potential losses and limited

protection, highlighting the need for

better water-management and climate-

resilience measures.

The economic losses in

Bulgaria from weather- and climate-related

extreme events, including floods and droughts,

are significant, with EUR 5.2 billion in losses

between 1980 and 2023, of which only 2%

(EUR 93 million) was insured. This makes

Bulgaria one of the EU countries with the

lowest levels of protection against economic

losses from climate-related extreme events,

as the country’s insurance coverage in this

area is well behind the EU average of around

18.5%. This shows that Bulgaria needs to

improve its water management and climate

resilience, for example by: (i) investing in

sustainable water practices; (ii) reducing water

losses; and (iii) promoting the more efficient

use of water resources (Annex 9). To respond

to these challenges, Bulgaria has put several

national governance structures in place,

including: (i) a national climate adaptation

plan; (ii) a 2030 climate adaptation strategy;

(iii) a national expert council on climate

change; (iv) a climate-change coordination

council; and (v) a unified rescue system and

focal point for the collection and reporting of

environmental data. However, the

country’s

institutional capacity to address climate-

change and water-management challenges is

still limited, and more efforts are needed to: (i)

strengthen

coordination

between

the

competent national authorities; (ii) develop

monitoring and modelling tools; and (iii)

improve reporting and planning at subnational

level. Furthermore, the country needs to

increase its institutional capacity to address

the social and economic impacts of climate

change, including by developing early warning

systems, emergency response plans, and

social-protection programmes (Annex 9).

Fostering the transition to a circular

economy would have many benefits,

including

improved

competitiveness.

Bulgaria is progressing slowly in its circular

economy transition, with a circular material

use rate of 4.9% in 2023. This is far below the

EU average and also poses significant risks to

the

country’s

long-term

sustainability.

Bulgaria’s resource productivity is also below

the EU average, with EUR 0.38 generated per

kg of material consumed in 2023. To improve

circularity, Bulgaria has adopted a strategy

and action plan for the transition to a circular

economy. This action plan includes measures

to increase recycling, reduce waste, and

promote sustainable patterns of production

and consumption. However, the plan appears

insufficient to: (i) address the

country’s below-

EU-average circular material use rate; and (ii)

address the significant investment gap to

meet circular economy objectives. Bulgaria

would need to increase its circular economy

investment by an estimated EUR 126 million

per year, with an additional EUR 21 million for

action on waste management, to close the

circular economy gap and unlock the full

potential of a circular economy (Annex 7).

kom (2025) 0202 - Ingen titel

SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS

children aged 6-15 attend schools where all or

most pupils are Roma.

Despite sustained efforts, low availability

of professionals in science, technology,

engineering and mathematics (STEM), and

insufficient labour-market relevance of

higher education exacerbate skills

shortages and mismatches.

In 2024, 40.5%

of Bulgarians aged 25-34 have a tertiary

education degree (against an EU average of

44.2%). As Bulgaria’s population declines, the

number of bachelor students is dropping (See

Annex 12), exacerbating skills shortages. The

participation in higher education of Bulgarians

from poor backgrounds remains low. In

addition, the matching of skills supply and

demand is further hampered by the

insufficient labour-market relevance of higher

education. Only 23.8% of higher education

students in Bulgaria in 2022 were pursuing a

degree in STEM subjects (EU average: 27.1%),

with fewer women enrolled than men. As part

of reforms under the Recovery and Resilience

Facility (RRF), the national map of higher

education has been adopted to include an

analysis of the offering

–

and needs

–

of the

country’s higher education institutions. This

map should serve as a basis for allocating

student places in public universities to more

effectively reflect more efficiently the needs

of the labour market. Under the RRF, STEM

laboratories are being set up in schools

nationwide to support the development of

digital skills and learning in STEM subjects.

However, there still remains scope to increase

teaching capacity in digital and STEM areas.

The

labour-market

relevance

vocational education and training (VET)

could be increased.

Skills mismatches are

exacerbated by the low alignment of VET with

the needs of the jobs market. Furthermore,

dual VET and work-based learning remains

unpopular, with very limited involvement of

companies. Although

Bulgaria’s VET Act has

Increasing skills by addressing

challenges in the education system

and strengthening adult learning

The availability of high skilled labour is

scarce due to structural challenges in the

education system.

Participation in early

childhood education is still among the lowest

in the EU (21.1% vs an EU average of 39.2%

in 2024 for children under 3 and 87.8% vs an

EU average of 93.3% for children aged 3 to

the age of compulsory education) and is

especially low for disadvantaged children.

Bulgaria also has one of the highest shares of

15-year-olds in the EU that do not have a

minimum level of proficiency in mathematics

(53.6% vs an EU average of 29.5%), reading

(52.9% vs an EU average of 26.2%) and

science (48% vs an EU average of 38.3%). The

lack of basic skills is also a very significant

barrier for later skills development. The share

of top-performing students is also very low.

These challenges are linked to school curricula,

which are still heavily knowledge-based. There

is insufficient focus on competences, and

teaching quality is inadequate (see Annex 12).

The challenges for improving teaching quality

stem mainly from: (i) the inability to attract

high-performing high-school graduates to the

profession; (ii) the insufficient quality of initial

teacher education; and (iii) the lack of

continuous professional development based on

a robust assessment of teachers’ training

needs. Socio-economic factors also severely

impact educational outcomes leading to large

inequalities that ultimately hinder productivity

and competitiveness. In the poorest quartile,

62%

15-year-olds

underachieve

simultaneously in all three subjects, compared

with 16.5% among their advantaged peers.

Social

segregation

increases

learning

disadvantages. For example, 64 % of Roma

kom (2025) 0202 - Ingen titel

been amended and the list of professions on

VET has been updated under the recovery and

resilience plan (RRP), it will only be possible to

align VET more with the needs of the jobs

market when programmes and learning

content for each profession are updated and

effectively applied in the education system.

There is also a need to: (i) continue raising the

awareness among students and employers of

dual VET; and (ii) strengthen the involvement

of employers and local actors in VET and dual

VET.

Low and declining participation in adult

learning hinders skills development and

the adaptability of the workforce,

thereby

weakening

Bulgaria's

competitiveness.

Adult participation in

learning is not only very low but also on a

decreasing trend. The rate in 2022 was 9.5%

(vs an EU average of 39.5%) and was even

lower among the poorly educated. This rate is

significantly below the 2030 national target of

35.4%. This poses significant risks to the

adaptability of the workforce to the digital and

green transitions. Despite having slightly

improved, the share of the adult population

with at-least basic digital skills (35.5% in

2023) remains well below the EU average

(55.5%) and the gap is even larger for young

people. Only one third of Bulgarians report

having the necessary skills to benefit from the

green transition, an insufficient share of the

population to meet the demands caused by

the significant restructuring being undergone

by the highly-energy intensive Bulgarian

economy (see Annex 12).

Significant

and

state-funded

measures are supporting adult up-skilling

and re-skilling, but further action is

needed to identify barriers and raise

awareness.

With

support from the EU’s

technical

support

instrument,

Bulgaria

developed a proposal for an action plan for

skills to implement the country’s national skills

strategy. The action plan for skills aims to: (i)

identify the skills needed for future jobs; (ii)

ensure that people with these skills find

employment where they can use these skills;

and (iii) strengthen the governance system for

adult learning. The EU’s European Social Fund+

and RRF are supporting key investments to

provide training in digital skills. In addition, a

pilot project for individual learning accounts is

under development, with plans to run from

2025 to 2027, although implementation of

this pilot project has been delayed (see Annex

12). Nevertheless, the persistently low levels

of adult learning indicate the need to identify

barriers to participation and adopt measures

aimed to increase flexibility, in part through: (i)

the promotion of more online training; (ii)

reducing administrative burden; and (iii) raising

awareness about the benefits of lifelong

learning. Bulgaria could boost the resilience

and adaptability of the workforce and

strengthen its competitiveness by: (i)

dedicating a higher share of measures to

helping people find work or training; and (ii)

incentivising employers and employees to

increase workplace training.

A more inclusive labour market

can offset demographic challenges

The strong performance of the labour

market is under pressure from adverse

demographic trends.

Employment has been

growing since 2021, staying above the EU

average to reach 76.8% in 2024 (aged 20-64),

and advancing towards the national

employment target of 79% by 2030.

Unemployment has also dropped to historically

low levels and was at 4.2% in 2024. A tight

labour market and government policies on

minimum and public sector wages are the

cause of recent wage growth, which has

considerably outpaced inflation in recent

years, except in 2022. Real wages grew by

6.4% in 2024 and are expected to increase by

8.4% in 2025. Nevertheless, labour costs

remain among the lowest in the EU, reflecting

low pre-accession wage levels and lower

labour productivity overall. Negative long-term

demographic trends, combined with net

emigration of workers over a prolonged period

of time, have reduced the working-age

population in the country. Positive net

migration to the country in recent years has

been insufficient to alter the declining labour

force. With a high proportion of Bulgarian

students studying abroad, greater prospects of

finding a good job outside the country, and

kom (2025) 0202 - Ingen titel

highly educated citizens leaving, the loss of

skilled workers remains a challenge. Thus,

attracting skilled workers and activating those

that are of working age and are able to work is

important to support economic growth

potential. A positive step in this direction was

taken with the amendment of the VET Act,

which means that people without a formal

education aged 16 or above can now be

encouraged into vocational training.

Vulnerable groups such as persons with

disabilities, the low-skilled, and Roma

face greater barriers to employment.

The

situation is particularly concerning for persons

with disabilities, as the disability employment

gap (the gap between the employment rate of

people with a disability and people without a

disability) was one of the highest in the EU in

2024. And the share of young people (15-29)

neither in employment nor in education or

training (NEET), although declining, remained

above the EU average. The gap in the

employment rate between low-skilled workers

and skilled workers was much higher than the

EU average. Employment outcomes for Roma

were much lower compared with the overall

employment rate. Bulgaria took certain

measures in 2024 such as the launch of eight

new ‘Activation’ clubs funded under the

European Social Fund+, which identify jobless

people and find them work or training.

Nevertheless, further sustained efforts will be

necessary to increase the participation in the

jobs market of these groups. This will support

the sustainable and inclusive growth potential

of the economy.

Regional

disparities

activity,

employment and unemployment persist.

The north-west of the country reports

particularly poor figures. There are also major

regional differences in activity rates. And

employment rates are also characterised by

large urban-rural divides (the employment rate

was 81.1% in cities, 77.9% in towns and

suburbs and 68.5% in rural areas in 2024).

Further efforts to support the most

disadvantaged regions are necessary to tap

the country’s potential for economic growth

and boost its overall competitiveness.

Poverty is decreasing while energy

poverty and access to quality

healthcare remain challenging

Energy poverty remains a structural

challenge.

Although the proportion of the

population unable to keep their homes

adequately warm has substantially decreased

since 2015, it has remained higher than the

EU average, particularly affecting those at risk

of poverty. Arrears on utility bills have also

been decreasing, but a significant proportion

of households still faces difficulties in paying

their bills on time. The housing-cost

overburden rate, indicating the share of

households that spend more than 40% of their

income on housing-related costs, remains high.

In 2008, Bulgaria introduced a targeted

heating allowance for the vulnerable

population to cover energy costs during the

winter season, with about a third of a million

households still benefiting from the scheme.

Successive governments have also invested in

renovating residential buildings to improve

their energy efficiency. In addition, a legal

definition of energy poverty was adopted in

2023. Nevertheless, there is room for

improvement. For example, Bulgaria could still:

(i) develop an information system/database to

identify the affected population; (ii) put in

place support mechanisms for the energy-

vulnerable population; and (iii) commit to

specific targets and timelines to reduce energy

poverty. These actions will be instrumental in

addressing the challenge, especially as

Bulgaria is moving towards liberalising its

electricity market.

Bulgaria has made progress in reducing

overall poverty risks and inequalities, but

significant

challenges

persist,

particularly for vulnerable groups.

The

2023 reform of the minimum income scheme

(included in the RRP) aimed to increase the

adequacy and coverage of income support.

Preliminary data suggest the reform has led to

an improvement in both coverage and

adequacy. Despite improvements and progress

towards the 2030 poverty-reduction target

(see Annex 11), the country still has a high

share of the population experiencing poverty

kom (2025) 0202 - Ingen titel

or social exclusion risks. This in particular

affects children, older people, persons with

disabilities, and Roma. The social protection

system’s limited capacity and uneven access

to quality services make it hard for Bulgaria to

achieve sustainable and inclusive growth. This

has also contributed to one of the highest

rates of income inequality in the EU. Increased

social spending and a reform of the minimum

income scheme under the RRP have improved

the situation to some extent. Better targeting

social benefits towards those most in need

could provide sufficient support without

jeopardising fiscal sustainability.

Challenges persist in the healthcare

system that risk undermining social

fairness,

productivity

and

the

development of human capital.

Life

expectancy in Bulgaria is among the lowest in

the EU, with high rates of treatable mortality

indicating

shortcomings

healthcare

effectiveness. Additionally, the country has

one of the highest rates of mortality at

working age. Bulgaria faces significant and

growing shortages

–

and an uneven

distribution

–

of healthcare professionals. The

number of practising nurses per 1 000 people

is one of the lowest in the EU (4.3 vs 7.6 in the

EU on average), limiting further

Bulgarians’

access to quality healthcare. Despite

healthcare spending rising constantly since

2019, it remains one of the lowest per capita

in the EU. In addition, low investment levels

hamper both patient access and the health

system’s capacity to contribute to innovation,

as suggested by low levels of R&D in the

healthcare system. RRF-funded reforms set

out proposed measures to: (i) address the

shortages of healthcare professionals; (ii)

address the uneven distribution of healthcare

professionals; and (iii) promote e-Health.

However, to increase the effectiveness of the

country’s

heavily hospital-centred system, it

will also be important to: (i) improve primary,

preventive, and outpatient care; and (ii) reduce

out-of-pocket payments as a share of total

healthcare costs.

These findings are consistent with the

second-stage analysis in line with the

EU’s social

convergence framework.

The

analysis points to challenges related to: (i)

education; (ii) participation in early childhood

education and care; (iii) basic skills levels; and

(iv) the labour-market relevance of vocational

education, training and higher education.

However, the analysis does not point to overall

social convergence challenges for Bulgaria, in

part due to the measures implemented or

planned (

(

) European Commission,

SWD(2025)95.

The analysis

relies on all the available quantitative and qualitative

evidence and the policy response undertaken and

planned.

kom (2025) 0202 - Ingen titel

KEY FINDINGS

To foster competitiveness, sustainability and

social fairness, Bulgaria would benefit from:

•

Urgently

accelerating

the

implementation of the recovery and

resilience plan,

including the REPowerEU

chapter; swiftly implementing

cohesion

policy,

taking

advantage

the

opportunities under the mid-term review

and making optimal use of EU instruments,

including

InvestEU

and

STEP,

to improve

competitiveness.

•

improving the quality of public

investment management and public

services

to attract productive private

investment;

•

improving the public procurement

process

by: (i) ensuring tendering

procedures are carried out in an open,

transparent and competitive way; and (ii)

encouraging

participation

these

processes;

•

strengthening the effectiveness of

regulatory bodies by ensuring their

political independence and ensuring

they have sufficient expertise and

resources

to reduce uncertainty among

businesses and boost investment;

•

concentrating research and innovation

efforts and resources

on fewer

institutions to: (i) increase the quality of

output; (ii) strengthen academic-business

links;

and

(iii)

accelerate

the

commercialisation of research for greater

relevance for businesses;

•

investing in clean-energy technologies

as well as expanding, upgrading and

digitalising the grid, and increasing

energy storage capacity

to help increase

the share of renewables

–

and increase

their integration

–

into the energy mix;

•

moving forward with the liberalisation

of the electricity market

and the

removal of electricity price caps for

businesses to further facilitate the entry of

new renewable energy sources and flexible

non-fossil-fuel energy assets;

•

increasing

investment

clean

transport infrastructure

to support the

uptake of clean mobility and incentivise the

modernisation of the passenger car fleet;

•

accelerating the green transition

further

by taking concrete steps to phase

out fossil fuel subsidies;

•

to support upward social convergence,

increasing participation in higher

education and strengthening adult

learning

to ensure skilled workers for the

labour market;

•

improving the quality of teaching

attracting more talent to the profession

and providing them with quality training

and continuous professional development

to increase students’ basic skills;

•

increasing

the

participation

vulnerable groups in the jobs market,

in particular persons with disabilities and

Roma, by strengthening the effectiveness

of policies to help people find work or

training and thus reduce the risk of poverty

and social exclusion;

•

reducing regional disparities

providing better education, administrative

and social services and better access to

quality healthcare in lower-income regions.

kom (2025) 0202 - Ingen titel kom (2025) 0202 - Ingen titel

ANNEXES

kom (2025) 0202 - Ingen titel kom (2025) 0202 - Ingen titel

LIST OF ANNEXES

Fiscal

A1.

A2.

Fiscal surveillance and debt sustainability

Taxation

Productivity

A3.

A4.

A5.

A6.

Innovation to business

Making business easier

Capital markets, financial stability and access to finance

Effective institutional framework

Sustainability

A7.

A8.

A9.

Clean industry and climate mitigation

Affordable energy transition

Climate adaptation, preparedness and environment

Fairness

A10. Labour market

A11. Social policies

A12. Education and skills

A13. Social Scoreboard

A14. Health and health systems

Horizontal

A15. Sustainable development goals

A16. CSR progress and EU funds implementation

A17. Competitive regions

107

LIST OF TABLES

A1.1.

A1.2.

A1.3.

A1.4.

A1.5.

A1.6.

A1.7.

A1.8.

A1.9.

General government balance and debt

Net expenditure growth

Net expenditure (outturn and forecasts), annual and cumulated deviations vis-à-vis the medium-term plan

Defence expenditure and the national escape clause

Macroeconomic developments and forecasts

General government budgetary position

Debt developments

RRF

–

Grants

Projected change in age-related expenditure in 2024-2040 and 2024-2070

kom (2025) 0202 - Ingen titel

A1.10.

A2.1.

A3.1.

A4.1.

A5.1.

A6.1.

A6.2.

A7.1.

A8.1.

A9.1.

A13.1.

A14.1.

A16.1.

A16.2.

A17.1.

Fiscal Governance Database Indicators

Taxation indicators

Key innovation indicators

Making business easier: indicators

Financial sector indicators

Selected indicators on administrative burden reduction and simplification

Key Digital Decade targets monitored through the Digital Economy and Society Index

Key clean industry and climate mitigation indicators: Bulgaria

Retail energy price components for household and non-household consumers, 2024

Key indicators for progress on climate adaptation, preparedness and environment

Social Scoreboard for Bulgaria

Key health indicators

Selected EU funds with adopted allocations - summary data (million EUR)

Summary table on 2019-2024 CSRs

Selection of indicators at regional level in Bulgaria

102

103

108

LIST OF GRAPHS

A2.1.

A2.2.

A3.1.

A4.1.

A5.1.

A5.2.

A5.3.

A5.4.

A5.5.

A6.1.

A6.2.

A7.1.

A7.2.

A7.3.

A8.1.

A8.2.

A8.3.

A9.1.

A9.2.

A10.1.

A10.2.

A11.1.

A11.2.

A11.3.

A12.1.

A14.1.

A14.2.

A15.1.

A16.1.

A16.2.

A17.1.

A17.2.

A17.3.

Tax revenue shares in 2023

Tax wedge for single and second earners, % of total labour costs, 2024

R&D investment as % of GDP, 2013-2023

Making Business Easier: selected indicators.

Net savings-investment balance

International investment position

Capital markets and financial intermediation

Composition of NFC funding as a % of GDP

Composition of HH financial assets per capita ('000 EUR) and as a % of GDP

Trust in justice, regional / local authorities and in government

Indicators of Regulatory Policy and Governance (iREG)

GHG emission intensity of manu-facturing and energy-intensive sectors, 2022

Manufacturing industry production: total and selected sectors, index (2021 = 100), 2017-2023

Greenhouse gas emissions in the effort sharing sectors, 2005 and 2023

Retail energy price components for household and non-household consumers, 2024

Monthly average day-ahead wholesale electricity prices and European benchmark natural gas prices (Dutch TTF)

Bulgaria's installed renewable capacity (left) and electricity generation mix (right)

Investment needs and gaps in EUR million, in 2022 constant prices

Direct dependency(1) on ecosystem services(2) of the gross value added generated by economic sector in 2022

Employment per region, 2008-2024

Employment low-skilled and disability employment gap

Components of AROPE, 2015-2024

Components of energy poverty 2015-2024

Housing cost overburden 2015-2024

Skills development in Bulgaria

Life expectancy at birth, years

Treatable mortality

Progress towards the SDGs in Bulgaria

Distribution of RRF funding in Bulgaria by policy field

Distribution of cohesion policy funding across policy objectives in Bulgaria

Labour productivity per hour

Access to healthcare and primary education, 2023

Greenhouse gas emissions per capita

100

107

110

LIST OF MAPS

A17.1.

Regional Competitiveness Index 2.0, 2022 edition

109

kom (2025) 0202 - Ingen titel

FISCAL

ANNEX 1: FISCAL SURVEILLANCE AND DEBT SUSTAINABILITY

This Annex contains a series of tables relevant for the assessment of the fiscal situation in Bulgaria,

including how Bulgaria is responding to Council recommendations issued under the reformed Economic

Governance Framework.

The reformed framework, which entered into force on 30 April 2024 (

), aims to strengthen debt

sustainability and promote sustainable and inclusive growth through growth-enhancing reforms and

priority investments. The medium-term fiscal-structural plans (hereinafter, MTPs or plans) constitute the

cornerstone of the framework, setting the budgetary commitment of Member States over the medium

term. The latter is defined in terms of net expenditure growth, which is the single operational indicator for

fiscal surveillance.

Bulgaria submitted its plan on 27 February 2025. The plan covers the period until 2028, presenting a

fiscal adjustment over four years. The Commission has assessed the MTP of Bulgaria and on 12 May

2025 recommended to the Council to adopt a recommendation setting the net expenditure growth ceilings

contained in the plan (

The assessment of the fiscal situation of Bulgaria considers the Commission Recommendation for a

Council Recommendation endorsing the Bulgaria’s plan and it is carried out on the basis of outturn data

from Eurostat, the Commission Spring 2025 Forecast and taking into account the Annual Progress Report

(APR) that Bulgaria submitted on 2 May 2025.

Furthermore, given Bulgaria’s request to activate the

National Escape Clause (

) following the Commission Communication of 19 March 2025(

), the

assessment also considers, as appropriate, the projected increase in defence expenditure based on the

Commission Spring 2025 Forecast.

The Annex is organised as follows. First, developments in

government deficit and debt

are presented

based on the figures reported in Table A1.1. Then, the assessment of the

fiscal situation of Bulgaria

follows, considering the

Commission’s proposal for a Council Recommendation endorsing the

plan,

based on the relevant figures presented in Tables A1.2 to A1.8, including data on defence

expenditure.

The Annex also provides information on the

cost of ageing

and the

national fiscal framework.

Fiscal

sustainability risks are discussed in the Debt Sustainability Monitor 2024 (

Developments in government deficit and debt

Bulgaria’s government deficit amounted to

3.0%

of GDP in 2024. Based on the Commission’s Spring 2025

Forecast, it is projected to decrease to 2.8% in 2025. The government debt-to-GDP ratio amounted to

24.1% at the end of 2024 and, according to the Commission, it is projected to increase to 25.1% end-

(

) Regulation (EU) 2024/1263 of the European Parliament and of the Council (EU) on the effective coordination of economic policies

and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 1467/97 on the implementation of the

excessive deficit procedure, and the amended Council Directive 2011/85/EU on the budgetary frameworks of Member States are the

core elements of the reformed EU economic governance framework.

(

)

COM(2025) 238 of 12.05.2025

(

) On 2 May 2025, Bulgaria requested to the Commission and to the Council the activation of the National Escape Clause. On this

basis, the Commission adopted a Recommendation for a Council Recommendation allowing Bulgaria to deviate from, and exceed,

the net expenditure path set by the Council, COM(2025)601.

(

) Communication from the Commission accommodating increased defence expenditure within the Stability and Growth Pact of 19

March 2025, C(2025) 2000 final.

(

)

European Commission (2025) ‘Debt Sustainability Monitor 2024,’

European Economy-Institutional Papers

306.

kom (2025) 0202 - Ingen titel

2025. The general government deficit is set to remain just under 3% of GDP going forward, whereas the

general government debt-to-GDP ratio is expected to increase by 2026, driven by a stable primary deficit

above 2% and sustained disinflation paired with increasing interest rates.

Table A1.1:

General government balance and debt

Variables

2024

% GDP

Outturn

-3.0

24.1

APR

-2.9

28.9

2025

COM

-2.8

25.1

APR

n.a.

2026

COM

-2.8

27.1

General government balance

General government gross debt

Source:

Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)

Developments in net expenditure

The net expenditure (

) growth of Bulgaria in 2025 is forecast by the Commission (

) to be above the

recommended maximum, corresponding to a deviation of 1.1% of GDP. The increase in expenditure is

mainly driven by a projected growth in defence investment in 2025 and by public wages expected to

continue rising, in line with recent trends, especially in the area of defence. The net expenditure growth in

the Commission’s forecast

is higher than the expected net expenditure growth presented by Bulgaria in its

Annual Progress Report. The difference is mostly due to the fact that the Commission has recorded some

expenditure as one-off for 2024, and thus a lower net nationally financed primary expenditure in the

same year, which has then lowered the basis for the net expenditure growth calculation for 2025. Also,

the Annual Progress Report includes higher EU funded expenditure and a greater impact of discretionary

revenue measures in 2025, albeit against a higher expected total expenditure, when compared to the

Commission forecast.

Table A1.2:

Net expenditure growth

* The cumulative growth rates are calculated by reference to the base year of 2024.

Source:

Medium-term fiscal structural plan of Bulgaria (MTP), Annual Progress Report (APR) and Commission's calculation based

on Commission Spring 2025 Forecast (COM).

The assessment of the net expenditure growth and in particular the comparison with the recommended

net expenditure path considers that Bulgaria has requested the activation of the national escape clause to

facilitate transitioning to a higher level of defence expenditure (

). General government defence

expenditure in Bulgaria amounted to 1.6% of GDP in 2021, 1.6% of GDP in 2022 and 1.5% of GDP in

(

) Net expenditure is defined in Article 2(2) of Regulation (EU) 2024/1263 as government expenditure net of (i) interest expenditure,

(ii) discretionary revenue measures, (iii) expenditure on programmes of the Union fully matched by revenue from Union funds, (iv)

national expenditure on co-financing of programmes funded by the Union, (v) cyclical elements of unemployment benefit

expenditure, and (vi) one-off and other temporary measures.

(

) Commission Spring 2025 Forecast,

European Economy-Institutional paper 318,

May 2025.

(

) On 4 June 2025 the Commission adopted a Recommendation for a Council Recommendation to deviate from, and exceed, the

recommended net expenditure path [BG - COM(2025)601].

kom (2025) 0202 - Ingen titel

2023 (

). According to the Commission Spring 2025 Forecast, expenditure on defence is projected at 1.4%

of GDP in 2024 and 2.6% of GDP in 2025. Based on current projections for defence spending, the

deviation that is projected for Bulgaria is within the flexibility provided by the national escape clause.

Table A1.3:

Net expenditure (outturn and forecasts), annual and cumulated deviations vis-à-vis the

medium-term plan

Variables

Total expenditure

Interest expenditure

Cyclical unemployment expenditure

Expenditure funded by transfers from the EU

National co-financing of EU programmes

One-off expenditure (levels, excl. EU funded)

Net nationally financed primary expenditure (before

7=1-2-3-4-5-6

discretionary revenue measures, DRM)

Change in net nationally financed primary expenditure (before DRM)

DRM (excl. one-off revenue, incremental impact)

Change in net nationally financed primary expenditure

10=8-9

(after DRM)

Outturn / forecast net expenditure growth

Net expenditure growth as reported in the medium-term plan *

13=(11-12) x 7

Annual deviation

14 (cumulated from 13)

Cumulated deviation

15=13/17

Annual balance

16=14/17

Cumulated balance

p.m. Nominal GDP

bn NAC

% change

bn NAC

% GDP

bn NAC

2023

Outturn

71.8

0.9

0.0

1.6

0.4

0.0

68.9

2024

Outturn

80.7

1.1

0.0

1.5

0.4

1.1

76.7

7.8

0.6

7.2

10.42%

n.a.

202.9

2025

COM

90.7

1.4

0.0

3.1

0.5

0.0

85.7

9.0

1.9

7.1

9.2%

6.2%

2.3

1.1

218.1

2026

COM

94.1

1.5

0.0

4.6

0.4

0.0

87.5

1.8

0.4

1.4

1.7%

4.9%

-2.8

-0.4

-1.2

-0.2

228.3

185.2

* The medium-term plan was positively assessed by the Commission and is now pending the endorsement by the Council.

Source:

Commission Spring 2025 Forecast and Commission's calculation

Table A1.4:

Defence expenditure and the national escape clause

Total defence expenditure

of which: gross fixed capital formation

Flexibility from increases in defence expenditure

Cumulated balance after flexibility

% GDP

2021

1.6

0.6

2022

1.6

0.5

2023

1.5

0.4

2024

1.4

0.3

2025

2.6

1.1

1.2

-0.2

2026

1.7

0.1

0.3

-0.5

Source:

Eurostat (COFOG), Commission Spring 2025 Forecast and Commission's calculation

(

) Eurostat, government expenditure by classification of functions of government (COFOG).

kom (2025) 0202 - Ingen titel

Table A1.5:

Macroeconomic developments and forecasts

Variables

1=7+8+9

2024

Outturn

2.8

4.2

4.6

-1.1

-0.8

1.3

APR

3.0

3.9

2.9

12.8

2.6

6.7

5.1

0.0

-2.1

0.2

0.6

4.1

2.4

3.6

4.5

8.7

n.a.

2025

COM

2.0

3.5

0.3

2.0

1.6

2.4

0.0

-0.4

-0.1

0.4

4.0

1.7

3.6

5.4

9.6

-1.4

APR

n.a.

2026

COM

2.1

2.5

1.9

3.5

2.1

2.8

2.5

0.0

-0.3

-0.5

0.3

3.8

1.8

2.5

6.1

-0.9

Real GDP

% change

Private consumption

% change

Government consumption expenditure

% change

Gross fixed capital formation

% change

Exports of goods and services

% change

Imports of goods and services

% change

Contributions to real GDP growth

- Final domestic demand

pps

3.1

- Change in inventories

pps

1.0

- Net exports

pps

-1.3

Output gap

% pot GDP

0.7

Employment

% change

1.1

Unemployment rate

4.2

Labour productivity

% change

1.7

HICP

% change

2.6

GDP deflator

% change

6.5

Compensation of employees per head

% change

10.4

Net lending/borrowing vis-à-vis the rest of the

% GDP

-1.7

world

Source:

Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)

Table A1.6:

General government budgetary position

Variables (% GDP)

1=2+3+4+5

8=9+16

18=1-8

19=1-9

22=20-21

23=22+16

2024

Outturn

36.7

14.8

6.6

9.0

6.3

39.8

39.2

11.4

4.5

15.7

2.2

3.0

2.5

0.5

-3.0

-2.5

-3.2

-0.5

-2.7

-2.2

APR

40.5

16.6

6.9

9.6

7.4

43.3

42.5

12.1

4.8

17.1

1.8

4.9

1.8

0.8

-2.9

-2.0

n.a.

0.0

-2.9

-2.1

2025

COM

38.8

15.9

6.6

9.2

7.0

41.6

40.9

12.7

4.2

16.0

1.8

3.6

2.6

0.6

-2.8

-2.2

-2.8

0.4

-3.2

-2.5

APR

n.a.

2026

COM

38.4

15.8

6.2

9.3

7.1

41.2

40.5

12.6

4.0

16.1

1.7

3.3

2.8

0.7

-2.8

-2.1

-2.7

0.0

-2.7

-2.0

Revenue

of which:

- Taxes on production and imports

- Current taxes on income, wealth, etc.

- Social contributions

- Other (residual)

Expenditure

of which:

- Primary expenditure

of which:

- Compensation of employees

- Intermediate consumption

- Social payments

- Subsidies

- Gross fixed capital formation

- Other

- Interest expenditure

General government balance

Primary balance

Cyclically adjusted balance

One-offs

Structural balance

Structural primary balance

Source:

Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)

kom (2025) 0202 - Ingen titel

Table A1.7:

Debt developments

Variables

2=3+4+8

4≈5+6+7

Gross debt ratio* (% of GDP)

Change in the ratio (pps. of GDP)

Contributions**

Primary balance

'Snow-ball' effect

of which:

- Interest expenditure

- Real growth effect

- Inflation effect

'Stock-flow' adjustment

2024

Outturn

24.1

1.2

2.5

-1.5

0.5

-0.6

-1.4

0.1

2025

APR

28.9

4.8

2.0

-0.9

0.8

-0.7

-1.0

3.7

COM

25.1

1.0

2.2

-1.0

0.6

-0.5

-1.2

-0.1

APR

n.a.

2026

COM

27.1

2.0

2.1

-0.4

0.7

-0.5

-0.6

0.4

* End of period.

** The 'snow-ball' effect captures the impact of interest expenditure on accumulated general government debt, as well as the

impact of real GDP growth and inflation on the general government debt-to-GDP ratio (through the denominator). The stock-flow

adjustment includes differences in cash and accrual accounting (including leads and lags in Recovery and Resilience Facility grant

disbursements), accumulation of financial assets, and valuation and other residual effects.

Source:

Commission Spring 2025 Forecast and Commission's calculation (COM), Annual Progress Report (APR)

Table A1.8:

RRF

–

Grants

Revenue from RRF grants (% of GDP)

RRF grants as included in the revenue projections

Cash disbursements of RRF grants from EU

2020

n.a.

2021

n.a.

2022

0.0

1.6

2023

0.0

2024

0.3

0.0

2025

0.9

1.8

2026

n.a.

Expenditure financed by RRF grants (% of GDP)

6=4+5

Total current expenditure

Gross fixed capital formation

Capital transfers

Total capital expenditure

2020

n.a.

2021

n.a.

2022

0.0

2023

0.0

2024

0.1

0.2

0.0

0.2

2025

0.1

0.8

0.0

0.8

2026

n.a.

Other costs financed by RRF grants (% of GDP)

Reduction in tax revenue

Other costs with impact on revenue

Financial transactions

2020

n.a.

2021

n.a.

2022

0.0

2023

0.0

2024

0.0

2025

0.0

2026

n.a.

Source:

Annual Progress Report

Cost of ageing

Total age-related spending in Bulgaria is projected to decline from about 19.5% of GDP in

2024 to about 18.5% in 2040, rising again thereafter to around 19% but remaining

considerably below the EU average (see Table

A1.9). The overall dynamic is mainly driven by the

projected decline in pension spending over the next decades, which more than offsets the limited increase

expected for healthcare and long-term care expenditure. Pension spending would fall by 1.2 pps of GDP

between 2024 and 2040, the largest projected decline among all EU Member States, and broadly stabilise

thereafter.

Public healthcare expenditure is projected at 4.5% of GDP in 2024 (well below the EU average

of 6.6%) and is expected to increase by 0.3 pps by 2040 but then reverse and decrease by 0.1

kom (2025) 0202 - Ingen titel

pp by 2070.

While the overall increase is driven by an ageing population, it is constrained in the long-

term by a significant decline in the overall population (

Public expenditure on long-term care is projected at 0.5% of GDP in 2024 (well below the EU

average of 1.7%) and is expected to increase by 0.1 pp of GDP by 2040 and by a further 0.1 pp

of GDP by 2070.

The projected increase is due to an ageing population but is relatively low due to

underdeveloped long-term care services (

Table A1.9:

Projected change in age-related expenditure in 2024-2040 and 2024-2070

age-related

expenditure

2024 (% GDP)

19.4

24.3

age-related

expenditure

2024 (% GDP)

19.4

24.3

change in 2024-2040 (pps GDP) due to:

pensions

-1.2

0.5

healthcare

0.3

long-term care

0.1

0.4

education

-0.2

-0.3

total

-1.0

0.9

age-related

expenditure

2040 (%GDP)

18.4

25.2

age-related

expenditure

2070 (%GDP)

-0.6

1.3

18.8

25.6

change in 2024-2070 (pps GDP) due to:

pensions

-1.0

0.2

healthcare

0.2

0.6

long-term care

0.2

0.8

education

0.0

-0.4

total

Source:

2024 Ageing Report (EC/EPC).

National fiscal framework

There is potential to enhance the capacity and independence of the Bulgarian independent

fiscal institution (IFI), the Fiscal Council of Bulgaria (FCB).

Currently, it has a narrow mandate,

monitoring compliance with fiscal rules and assessing the macroeconomic and budgetary forecasts and is

supported by a thinly staffed Secretariat of only two full-time employees. The six-year mandates of

Members are not staggered, increasing the need for transparency in the appointment process. The

mandate of the previous Board expired in November 2021, and a new board was only appointed in March

2025. Despite a legal requirement to provide the FCB with all necessary information, improvements in

practice are needed regarding both the content and timing of delivery. The policy dialogue with the

government and the parliament could be further developed.

The planning and budgeting of public investments is subject to ongoing reform in Bulgaria,

while room for improvement remains.

The 2024 State Budget Law approved an investment program

for nationally financed projects, centralising capital expenditures into a dedicated fund to improve

planning, transparency, and efficiency. The medium-term budgeting framework includes capital spending

ceilings for the budget year and the next two years. Yet, these are indicative and subject to yearly

amendments. Project assessment and selection based on objective value-for money indicators are not in

place yet and neither are external quality assurances that could help reduce underrepresentation of risks

and costs ((

). However, reforms are underway to introduce standardised appraisal methods ((

). After

sufficient time since a project started delivering, a comprehensive ex-post review can be carried out to

assess strategic performance and they require careful planning and are resource intensive. In Bulgaria, ex

post reviews are neither systematically required nor frequently conducted.

(

) Key performance characteristics, recent reforms and investments of the Bulgarian healthcare system are discussed in Annex 14

‘Health and health systems’.

(

) The quality and adequacy of the Bulgarian long-term care system are covered in Annex 11

‘Social policies’.

(

) OECD (2023), Public Investment in Bulgaria: Planning and Delivering Infrastructure, OECD Public Governance Reviews, OECD

Publishing, Paris, https://doi.org/10.1787/b73ef3b4-en.

(

) For example, reforms supported by the Technical Support Instrument of the European Commission.

kom (2025) 0202 - Ingen titel

Table A1.10:Fiscal

Governance Database Indicators

2023

Country Fiscal Rule Strength Index (C-FRSI)

Medium-Term Budgetary Framework Index (MTBFI)

Bulgaria

22.26

0.73

EU Average

14.52

0.73

The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level based

on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. The

Medium-Term Budgetary Framework Index (MTBFI) shows the strength of the national MTBF based on i) coverage of the

targets/ceilings included in the national medium-term fiscal plans; ii) connectedness between these targets/ceilings and the

annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal

institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength.

Source:

Fiscal Governance Database

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ANNEX 2: TAXATION

This annex provides an indicator-based

overview of Bulgaria’s tax system.

It includes

information on: (i) the tax mix; (ii) competitiveness

and fairness aspects of the tax system; and (iii)

tax collection and compliance.

Graph A2.1:

Tax revenue shares in 2023

Tax revenue shares in 2023, Bulgaria (outer ring)

and EU (inner ring)

21,3

taxes account for only 0.1% of Bulgaria’s total tax

revenue, indicating that there is potential to

strengthen the application of the ‘polluter pays’

principle. Bulgaria has implemented one of the six

possible types of pollution and resources taxes (i.e.

taxes on NOx emissions). However, it has not yet

introduced the other five types (i.e. taxes on:

incineration and landfilling; waste discharge into

water; fertilisers; pesticides; and plastic products).

Bulgaria’s

levels of property and corporate

taxation are below the EU average.

In 2023,

the average forward-looking effective tax rate on

corporate income in Bulgaria was 9.4%, which is

considerably below the EU average (18.9%), but

not very far from the statutory tax rate (10%).

Moreover, companies can carry forward losses for

up to five consecutive years. These two features of

the tax system (low effective rates and the ability

to carry forward losses for five years), combined

with the significant tax incentives provided for

investments in poorly developed areas may

benefit economic growth. At the same time, other

factors are working in the opposite direction and

potentially holding back growth. These other

factors include the lack of tax incentives for R&D,

the debt-equity bias and the treatment of stock

options on a case-by-case basis (creating

considerable uncertainty over the use of employee

stock options). Moreover, Bulgarian entities in the

scope of the OECD-proposed

‘global minimum tax’

have been subjected to a minimum effective tax

rate of 15% as of 1 January 2024, while public

country-by-country reporting had to be adopted

from 1 January 2025.

Bulgaria has a flat-rate tax system, which is

not progressive (unlike most tax systems in

the EU).

Bulgaria has a flat-rate tax system with

one of the lowest personal income tax rates in the

EU (only 10%). Unlike some Member States with a

flat income tax rate, there is no basic tax

allowance, which further limits the progressivity of

the tax system. The tax wedge is therefore

relatively high for low-income earners and

relatively low for high-income earners (Graph

A2.2) (

). This may reduce

employers’

demand for

low-skilled workers, which may partly explain the

low employment rate of low-educated people

(

) The tax wedge is defined as the sum of personal income

taxes and employee and employer social-security

contributions net of family allowances, expressed as a

percentage of total labour costs (the sum of the gross wage

and social-security contributions paid by the employer).

21,9

51,2

26,9

36,2

42,5

Taxes on labour

Taxes on consumption

Taxes on capital

Source:

Taxation Trends Data, DG TAXUD

Bulgaria’s tax revenue is relatively low in

relation to its GDP, with the largest

contribution coming from consumption taxes.

The low-tax environment with respect to direct

taxes benefits economic activity because it

encourages

investment

and

employment.

Table A2.1

shows that Bulgaria’s tax revenue as a

percentage of GDP was considerably below the EU

average in 2023 (29.9% vs an EU average of

39%), having fallen by 1.2 pps compared with

2022. The share of consumption taxes as a

proportion of total tax revenue was significantly

above the EU average (42.5% compared with an

EU average of 26.9%). However, revenue from

labour taxes was significantly below the EU

average, both as a share of GDP and as a share of

total taxation (see Graph A2.1). Revenue from

property taxes was also relatively low as a

percentage of both GDP and total tax revenue, as

were revenues from recurrent property taxes,

which are considered a particularly growth-friendly

type of taxation. There is therefore room to

increase recurrent property taxes to help address

potential fiscal sustainability challenges in

Bulgaria.

Bulgaria’s environmental taxes are higher

than the EU average but could still be

expanded.

These taxes accounted for 15.3% of

total tax revenues in 2023, which was one the

highest shares in the EU-27. This was mostly due

to energy taxes (for more on policies related to

environmental sustainability, see Annex 7).

Nevertheless, taxes on pollution and resources

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Table A2.1:

Taxation indicators

Median (EU-27)

Tax structure

2010

Total taxes (including compulsory actual social contributions) (% of

GDP)

Taxes on labour (% of GDP)

of which, social security contributions (SSC, % of GDP)

Taxes on consumption (% of GDP)

of which, value added taxes (VAT, % of GDP)

Taxes on capital (% of GDP)

Personal income taxes (PIT, % of GDP)

Corporate income taxes (CIT, % of GDP)

Total property taxes (% of GDP)

Recurrent taxes on immovable property (% of GDP)

Environmental taxes (% of GDP)

Effective carbon rate in EUR per tonne of CO

equivalents

Tax wedge at 50% of average wage (single person) (*)

Tax wedge at 100% of average wage (single person) (*)

Corporate income tax - effective average tax rates (1) (*)

Difference in Gini coefficient before and after taxes and cash social

transfers (pensions excluded from social transfers) (2) (*)

Outstanding tax arrears: total year-end tax debt (including debt

VAT gap (% of VAT total tax liability, VTTL) (**)

25,4

8,4

6,6

13,4

8,3

3,6

2,8

1,8

0,5

0,3

2,7

32,5

9,2

3,6

Bulgaria

2021 2022

30,7

11,1

8,8

14,0

9,3

5,6

3,4

2,8

0,8

0,3

2,8

34,9

9,4

4,7

81,0

3,7

31,1

10,4

8,2

12,9

9,0

7,8

3,1

2,9

0,7

0,2

4,8

34,9

9,4

4,4

67,7

7,7

2023

29,9

10,8

8,5

12,7

8,8

6,4

3,3

2,9

0,6

0,2

3,4

65,0

34,9

9,4

4,2

2024

2010

37,8

19,8

12,9

10,9

6,8

7,1

8,6

2,2

1,9

1,1

2,5

33,9

40,9

21,3

8,6

2021

40,2

20,5

13,0

11,2

7,3

8,5

9,6

2,9

2,2

1,1

2,4

86,0

31,8

39,9

19,3

8,2

35,5

6,6

EU-27

2022 2023

39,7

20,1

12,7

10,9

7,4

8,7

9,4

3,2

2,1

1,0

2,1

31,5

39,9

19,1

7,9

32,6

7,0

39,0

20,0

12,7

10,5

7,1

8,5

9,3

3,2

1,9

0,9

2,0

84,8

31,5

40,2

18,9

7,7

2024

By tax base

Some tax types

Progressivity &

fairness

34,9

31,8

40,3

Tax administration &

considered not collectable) / total revenue (in %) (*)

compliance

(1) Forward-looking effective tax rate (KPMG).

(2) A higher value indicates a stronger redistributive impact of taxation.

(*) EU-27 simple average.

(**) For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in

the EU - 2024 report, https://data.europa.eu/doi/10.2778/2476549

For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage,

https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en.

Source:

European Commission, OECD

(48.5% of whom are employed in Bulgaria vs an

EU average of 58.7%). The lack of progressivity in

the tax system also means that the tax-and-

benefit system is less able to redistribute income.

The tax-and-benefit system reduced the Gini

coefficient (a measure of income inequality) in

2023 by only 4.2 points, which was well below the

EU average of 7.7 points (see Table A2.1).

Simulations using the EUROMOD microsimulation

model based on 2017 data and policies suggest

that an annual basic tax allowance of EUR 2 800

for low incomes financed by an increase in the

statutory tax rate could reduce relative poverty by

around 0.6 pps and inequality by 0.8 Gini

points (

Graph A2.2:

Tax wedge for single and second

earners, % of total labour costs, 2024

Tax wedge, % of total labour costs

34,9

34,2

100

150

Earnings as % of the average wage

Single earner - BG

Second earner - BG

Single earner - EU average

Second earner - EU average

The tax wedge for second earners assumes a first earner at

100% of the average wage and no children. For the full

methodology, see OECD, 2016, Taxing Wages 2014-2015.

Source:

European Commission

(

)

Barrios, S. et al., 2020, ‘Progressive Tax Reforms in Flat Tax

Countries’, Eastern

European Economics, Vol. 58/2, pp. 83-

107.

Bulgaria continues to face some challenges

in the efficiency of tax administration.

The

2022 VAT compliance gap (the gap between

revenues collected and the theoretical tax liability)

was close to the EU-27 average, at 7.7%

compared with 7.0% for the EU. Overall, there is

still considerable room to improve the efficiency of

the tax administration. Outstanding tax arrears

decreased by 16.4 pps to 67% of total revenue

collected between 2021 and 2022, but this was

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still among the highest in the EU (the EU average

is 32.6%). Bulgaria is also lagging behind other

Member States in the degree to which tax returns

are pre-filled, and this can be considered as an

indicator of the compliance costs that Bulgarian

taxpayers face. The electronic filing rates for

personal-income-tax returns have improved in

recent years but are still lower than in other

Member States.

Bulgaria’s recovery and resilience

plan does not include tax reforms, despite 2019

and 2020 country-specific recommendations

related to taxation. However, Bulgaria has put in

place some measures to prevent money

laundering by people providing professional

company services (including accountants and tax

advisers) and others providing incentives for

electric mobility.

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PRODUCTIVITY

ANNEX 3: INNOVATION TO BUSINESS

Despite some progress in recent years,

Bulgaria remains an ‘emerging innovator’

(

mainly due to significant underinvestment in

R&D and weak science-business ties.

According to the 2024 European Innovation

Scoreboard (

the

country’s

innovation

performance has increased over time, but at a

slower pace than that of the EU. Sustaining this

positive trend will be crucial to closing the growing

gap with the EU average. While total R&D

intensity (

) increased from 0.43% in 2007 to

0.79% in 2023, both public and private R&D

investment remains critically low (among the

lowest in the EU) and is still far from Bulgaria’s

goal of spending 2% of its GDP on R&D by

2025 (

). In addition to a fragmented research

system and weak science-business ties, this

underinvestment weighs heavily on Bulgaria’s

innovation potential. Strengthening the Bulgarian

public science base and its linkages with the

business ecosystem, while boosting private R&D

efforts through well-calibrated public support

tools, will be essential to improving Bulgaria’s

innovative capacity and competitiveness.

Graph A3.1:

R&D investment as % of GDP, 2013-

2023

1.6

1.4

1.2

0.8

0.6

0.4

0.2

2013

2015

2019

2020

2021

2022

2023

BG public R&D %GDP

EU average public R&D % GDP

BG business R&D %GDP

EU average business R&D %GDP

Source:

Eurostat

Science and innovative ecosystems

Bulgaria’s scientific and technological

potential continues to remain largely

untapped due to underfunding and a highly

fragmented public research landscape.

Over

the last decade, Bulgaria has been unable to

increase its public R&D intensity, which remains

well below the EU average (0.28% of GDP in 2023

vs 0.72% in the EU). Low public R&D spending is

affecting the quality of the public science base,

which is among the lowest in the EU (

). Although

performance-based funding progressed in the past

years it still accounts for only a very small share

of the overall institutional funding of public

research organisations, providing limited financial

incentives

for

scientific

excellence.

The

consequences of low levels of public R&D

expenditure in Bulgaria are further exacerbated by

the fact that the limited public R&D budget is

distributed over a large number of higher

education institutions and research organisations.

Through the Horizon Policy Support Facility (PSF),

the Bulgarian government receives support to

(

) As measured in scientific publications of the country within

the top 10% most cited scientific publications worldwide as

% of total scientific publications of the country: 3.3 (2021) in

Bulgaria vs 9.6 (2023) in the EU.

(

) The European Innovation Scoreboard categorises EU Member

States into four performance groups based on their scores:

Innovation Leaders, Strong Innovators, Moderate Innovators,

and Emerging Innovators.

(

) 2024 European Innovation Scoreboard, country profile:

Bulgaria,

https://ec.europa.eu/assets/rtd/eis/2024/ec_rtd_eis-

country-profile-bg.pdf.

The scoreboard provides a

comparative analysis of innovation performance in EU

countries, including the relative strengths and weaknesses of

their national innovation systems (also compared to the EU

average).

(

) Defined as gross domestic expenditure on R&D as a

percentage of GDP.

(

) As set out in the national strategy for the development of

scientific research 2017-2030.

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address its fragmented research landscape. The

ongoing PSF review is assessing the Bulgarian

scientific ecosystem to identify the policy levers to

be used and provide concrete recommendations

for consolidating research-performing institutions.

A proper and timely implementation of these

recommendations, which is expected in June 2025,

will be key to increasing the efficiency and

excellence of Bulgaria’s public research system,

which provides the foundation for strong

innovation performance.

Ineffective coordination between ministries

and implementing agencies hinders effective

policy

development

and

the

proper

implementation of reforms and research and

innovation (R&I) strategies.

The new Research

and Innovation Act, adopted in May 2024 (

) as

part of the recovery and resilience plan, regulates

the role and responsibilities of the institutions

involved in the policy cycle. One of its key

elements is the establishment of an Innovation

and Science Research Council to advise the

Ministry of Education and Science and the Ministry

of Innovation and Growth on matters related to

research and innovation. One third of the Council’s

members represent businesses. The Council,

together with the Research and Innovation Act,

supports the creation of a research and innovation

ecosystem by ensuring close links between

academia and business sectors, including the

promotion of technology transfers (

businesses in Bulgaria are low-tech, which limits

their ability to innovate and adopt new

technologies (

). This limited innovation activity of

businesses also results in weak innovation output,

as measured for example by patents (

Limited academia-business links continue to

serious

obstacle

the

commercialisation of research results.

Science-business cooperation, as reflected in the

share of public-private scientific co-publications,

remains at the low end of the scale, 5.6%

compared to the EU average of 7.7%. Public R&D

expenditure financed by businesses is also well

below the EU average. This suggests that

Bulgarian businesses have little incentive to work

with public research institutions, which then limits

the innovation output and commercialisation of

research. The technology transfer ecosystem (

)

remains underdeveloped: not all research-

performing institutions have a technology transfer

office, and if they do, these offices generally lack

sufficient

resources

and

administrative

capacity ( ). Furthermore, while entrepreneurship

education is embedded in the school curriculum, it

is limited by its scale and low instruction time.

The uptake of digital technologies is

significantly below the EU average, despite

recent progress on the uptake of cloud

services by small and medium-sized

enterprises (SMEs).

In 2024, 49.9% of the

country’s SMEs had

at least a basic level of digital

intensity, far below the EU average of 72.91% and

last among EU Member States. Against an EU

average of 13.48%, only 6.47% of the country’s

firms had adopted AI in 2024. Cloud adoption

(14.22%) was extremely low in 2023 compared to

the EU average (38.86%), and only 21.86% of

(

) Innovation.bg 2024, ARC Fund:

https://arcfund.net/en/category-publications/inovatsii-bg-

2024/.

(

) Measured as patent applications filed under the Patent

Cooperation Treaty per billion of GDP (in purchasing power

standards): 0.3 in Bulgaria (2022) vs 2.8 (2024) in the EU.

(

) Strategic evaluation of the technology transfer and IPR

protection systems of Bulgaria, Croatia and Romania and

recommendations for their enhancement:

https://publications.jrc.ec.europa.eu/repository/handle/JRC136

807.

(

) Bulgaria: Country Needs and STI Policy Mix Assessment,

September 2020, World Bank.

Business innovation

Low and stagnant private R&D investment,

resulting in modest innovation output,

hinders Bulgaria’s economic development.

Between 2021 and 2023, business R&D intensity

remained stagnant at 0.51% of GDP, well below

the EU average of 1.49%. In addition, public

support to business R&D remains marginal and

insufficient to stimulate private R&D efforts. Public

support to business R&D stands at 0.011% of

GDP, well below the EU average of 0.204%. Many

(

)

https://www.mon.bg/regulation/zakon-za-nasarchavane-na-

nauchnite-izsledvaniya-i-inovacziite/.

(

)

https://op.europa.eu/en/publication-detail/-

/publication/80ec9c96-be86-11ef-91ed-

01aa75ed71a1/language-en.

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firms used data analytics compared to 33.17% in

the EU. To address this issue, the Bulgarian

recovery and resilience plan includes an

investment to support the deployment of digital

technologies in SMEs and improve their readiness

for the subsequent adoption of Industry 4.0

technologies. The cohesion policy investment

would primarily focus on supporting SMEs in

achieving higher levels of digitalisation and

deploying Industry 4.0 technologies. Bulgaria has

made progress in its contribution to the

development of strategic technologies such as

semiconductors. The country’s quantum computing

capabilities make it a forerunner in the EU for

quantum communication technologies and

cybersecurity. The country is home to the

European High Performance Joint Undertaking

´Discoverer´, which is one of the eight

supercomputers located across Europe and is fully

operational.

order to support the growth of the country’s start-

up ecosystem (

Innovative talent

Systemic loss of scientific capacities is

hampering Bulgaria’s competitiveness

and

transition towards a knowledge-based

economy.

Bulgaria’s pool of available workers for

R&I, as measured by the share of new graduates

in science and engineering in the population, has

been on a downward trend since 2010 and is well

below the EU average (

). This is further

exacerbated by one of the lowest, but recently

growing (

), shares of people aged 25-34 who

have successfully completed tertiary education

(40.5% against the EU average of 44.2%), along

with an ageing workforce (

) and lack of research

staff due to low career prospects. This is reflected

in the low number of researchers (full-time

equivalents) employed by the public sector per

thousand of the active population, which has

remained among the lowest of all EU countries

(2.8 in 2023 compared to an EU average of 4.2).

Entrepreneurship education is embedded in the

school curriculum (grade 1–12); however, it is

limited by its scale, low instruction times and the

lack of specific national strategy. In higher

education, the promotion of entrepreneurial

education is not recognised (

) as a strategic goal,

and the role of universities in providing

entrepreneurship education is not clearly defined.

Financing innovation

The availability of risk capital has improved

over the years and supports the growth of

Bulgaria’s start-up

ecosystem; however, it

remains small compared with other countries

worldwide.

Venture capital investment has grown

significantly (0.024% of GDP in 2023 vs 0.007%

in 2019), but is still below the EU average of

0.078% and is concentrated in seed and start-up

funding. The shares (% of total venture capital)

are well above the EU average (24.6% vs 7.3%

and 64.5% vs 44% respectively), showing that

Bulgaria’s start-up

ecosystem is growing. Bulgaria

has emerged as the entrepreneurial hub in south-

east Europe with over EUR 1 billion of investments

in the last five years (2019-2023) and the highest

number of funded start-ups per capita in the

region (

). Another source of finance for

innovative companies comes from private equity,

but the average annual investment, at 0.1% of

GDP, is still below the EU average of 0.6%. Early-

stage innovative firms in Bulgaria continue to face

a persistent financing gap throughout their

lifecycle, highlighting the need to further develop

the private equity and venture capital markets in

(

) See also Annex 5: Access to finance.

(

) Measured as new graduates in science and engineering per

thousand of the population aged 25-34: 10.2 in Bulgaria

(2022) vs 17.6 (2024) in the EU.

(

) Measured by share of population aged 25-34 who have

successfully completed tertiary education (%): 35.8 (2023)

to 40.5 (2024) in Bulgaria

(

)

https://www.nsi.bg/bg/content

(

) Yordanova, D., (2021a). Nascent Technology

Entrepreneurship among Bulgarian STEM Students,

Administrative Sciences, vol:11, issue:4.

(

)

https://bvca.bg/wp-content/uploads/2024/02/Project-

Venture-Startup-Ecosystem-Overview_date.pdf

kom (2025) 0202 - Ingen titel

Table A3.1:

Key innovation indicators

Bulgaria

Headline indicator

R&D intensity (gross domestic expenditure on R&D as % of GDP)

Science and innovative ecosystems

Public expenditure on R&D as % of GDP

Scientific publications of the country within the top 10% most cited

publications worldwide as % of total publications of the country

Researchers (FTE) employed by public sector (Gov+HEI) per thousand

active population

International co-publications as % of total number of publications

R&D investment & researchers employed in businesses

Business enterprise expenditure on R&D (BERD) as % of GDP

Business enterprise expenditure on R&D (BERD) performed by SMEs as %

of GDP

Researchers employed by business per thousand active population

Innovation outputs

Patent applications filed under the Patent Cooperation Treaty per billion

GDP (in PPS €)

Employment share of high-growth enterprises measured in employment

(%)

Digitalisation of businesses

SMEs with at least a basic level of digital intensity

% SMEs (EU Digital Decade target by 2030: 90%)

Data analytics adoption

% enterprises (EU Digital Decade target by 2030: 75%)

Cloud adoption

% enterprises (EU Digital Decade target by 2030: 75%)

Artificial intelligence adoption

% enterprises (EU Digital Decade target by 2030: 75%)

Academia-business collaboration

Public-private scientific co-publications as % of total number of

publications

Public expenditure on R&D financed by business enterprises (national) as

% of GDP

Public support for business innovation

Total public sector support for BERD as % of GDP

R&D tax incentives: foregone revenues as % of GDP

BERD financed by the public sector (national and abroad) as % of GDP

Financing innovation

Venture capital (market statistics) as % of GDP, total (calculated as a 3-

year moving average)

Seed stage funding share (% of total venture capital)

Start-up stage funding share (% of total venture capital)

Later stage funding share (% of total venture capital)

Innovative talent

New graduates in science and engineering per thousand population aged

25-34

Graduates in the field of computing per thousand population aged 25-34

12.7

1.7

11.1

2.5

9.1

2.8

10.0

3.2

10.2

3.4

17.6

3.6

0.003

10.9

88.1

0.012

24.6

16.4

0.008

57.7

35.8

6.5

0.015

49.3

47.3

3.4

0.017

47.2

50.2

2.6

0.024

24.6

64.5

10.9

0.078

7.3

44.0

48.7

0.014

5.7

0.014

4.5

0.029

0.026

5.3

0.021

5.6

7.7

0.05

8.9

0.02

0.6

0.5

19.46

0.5

14.16

0.3

2.8

12.51

0.36

0.32

0.6

0.52

0.27

0.57

0.25

2.8

0.51

0.22

2.7

0.51

0.24

3.1

0.51

2.7

1.49

0.4

5.7

2.70

0.3

0.23

1.9

2.8

45.2

0.21

2.9

2.6

48.3

0.27

2.5

2.8

37.9

0.26

3.3

2.7

37.4

0.24

2.8

37.9

0.28

2.8

36.3

0.72

9.6

4.2

55.9

0.64

12.3

39.3

0.60

0.74

0.85

0.77

0.75

0.79

2.24

3.45

2012

2017

2020

2021

2022

2023

2024 EU average (1)

USA

9.93

3.29

47.18

21.86

14.22

3.62

49.93

6.47

72.91

33.17

38.86

13.48

0.008

0.019

0.016

0.011

0.204

0.102

0.1

0.251

0.141

0.11

(1) EU average for the last available year or the year with the largest number of country data.

Source:

Eurostat, DG JRC, OECD, Science-Metrix (Scopus database), Invest Europe, European Innovation Scoreboard

kom (2025) 0202 - Ingen titel

ANNEX 4: MAKING BUSINESS EASIER

Despite some efforts to improve the business

environment, Bulgarian businesses face the

continuing

challenges

political

uncertainty, administrative and regulatory

burden, and (skilled) staff shortages.

Capacity

constraints in the public sector negatively impact

various areas of the business environment

–

such

as the performance of the public procurement

system, absorption of EU funds and the related

poor quality of infrastructure. Regulatory

restrictions in professional services and

administrative burden remain high. Progress has

been made on digital connectivity, but persistent

inadequate digital infrastructure coverage in

sparsely populated, remote and rural areas needs

to be addressed.

current and short-term situation to be good or

satisfactory, and are optimistic (albeit less

optimistic than in 2023) (

). In terms of

investment planning, Bulgarian investors are more

optimistic (43%) than those in Romania, who

responded to a similar survey (24.1%) (

However, only 7% of the Bulgarian investors are

satisfied with the level of political and social

stability, and only 22%/27% are satisfied with the

quality

academic

education/vocational

education and training (VET). In addition, the lack

of skilled staff is forcing more than 50% of firms

to reduce their planned level of investment. Nearly

80% of firms expect higher labour costs and are

wary of accepting additional orders. In order to

ease the negative impact, firms are increasingly

investing in automation and digitalisation,

educating their own staff and raising wages (

Access to finance is mainly an obstacle for

construction activity, but late business-to-

business payments

risk disrupting firms’

cash flows in all sectors.

According to the EIB

Investment Survey (

), availability of finance is an

obstacle to investment for only 35% of Bulgarian

firms (below the EU average of 45%) (see the

Annex 5). Late business-to-business payments

continue to be problematic for 27.7% of SMEs in

2024 (the EU average is 48%) (

). The business-

to-business payment gap in 2024 has slightly

decreased compared with 2023 and is now 16

days (the EU average is 15.5 days) (

). Corporate

customers are among the slowest in the EU to

make payments and above the EU average (65

days vs. 60 days). Customers in sectors such as

banking and financial services, industry and

chemicals, and construction even take up to 78

days. The payment gap from the public sector is

increasing and is still above the EU average (19.7

days vs 16.2 days).

Economic framework conditions

Insufficient availability of skilled staff and

uncertainty about the future are weighing on

business activity and investment.

According to

the EIB Investment Survey (

), the primary

obstacles to long-term investments for Bulgarian

businesses are insufficient availability of skilled

staff (89%) (see also the Annex 10) and

uncertainty about the future (82%). Short-term

business indicators specifically point to labour

shortages in manufacturing, where 25% of gross

value added (GVA) is generated. In the

pharmaceutical, metal and rubber production

sectors especially, up to 72% of the firms reported

labour shortages, a factor that limits production

activity. In the service sector, which has a 68%

GVA share, labour shortages are highest in

tourism-related services, such as accommodation

(63%) and food/beverages (54%). Finding skilled

staff and experienced managers are, together with

finding customers, the main problems for

Bulgarian SMEs

–

respectively 30% and 17% of

SMEs (broadly in line with the EU averages of 26%

and 18%) (

Economic and political uncertainty as well as

skill shortages also impact foreign investors’

investment activities.

Following a survey of

managers, most foreign investors consider their

(

) European Investment Bank,

EIB investment survey 2024,

based on interviews carried out between April and July 2024.

(

) European Commission, Survey on access to finance for

enterprises (SAFE), Analytical Report 2022.

(

) AHK Bulgarian, Konjunkturumfrage 2024,

EU-Mitgliedschaft

und steuerliche Rahmenbedingungen: Bulgariens wichtigste

Vorteile laut DBIHK- Konjunkturumfrage 2024.

(

) AHK Romania, Business outlook, autumn 2024.

(

) AHK Bulgarian, Konjunkturumfrage 2024,

EU-Mitgliedschaft

und steuerliche Rahmenbedingungen: Bulgariens wichtigste

Vorteile laut DBIHK- Konjunkturumfrage 2024.

( ) European Investment Bank,

EIB investment survey 2024,

based on interviews carried out between April and July 2024.

( ) European Commission and European Central Bank,

2023

SAFE survey.

Survey conducted between September and

October 2023.

( ) Intrum,

European payment report 2024.

kom (2025) 0202 - Ingen titel

(4) Late payments

Bulgarian

firms

consider

transport

infrastructure as an obstacle to investment

to a greater extent than their counterparts

in the rest of the EU.

According to the EIBIS

2024 survey (

), 58% of respondents see

transport infrastructure as an obstacle to

investment (compared with 45% in the EU). In

addition, 62% (39% in the EU) consider

inadequate infrastructure as a problem when

doing business (

). Together with Cyprus, Hungary

and Romania, Bulgaria is ranked the lowest in the

World Bank’s Logistics Performance Index (LPI) (

The score of the infrastructure component

–

evaluating the quality of soft and hard trade and

transport-related

infrastructure

(information

technology, ports, railroads, roads)

–

is better (3.1)

than in 2018 (2.8), but it reduces Bulgaria’s overall

performance on logistics (

Bulgaria has a well-developed and growing

connectivity infrastructure with a high

internet penetration rate and widely

available broadband services (especially in

urban areas

–

but rural areas lack coverage).

Bulgaria’s households have a high fibre-coverage

for premises, with 88.6% connected (much higher

than the EU average of 64%). However, Bulgaria’s

5G-coverage and take-up of high-speed

broadband remain below the EU averages of

respectively 89.3% and 65.9% (5G covers only

70.9% of populated areas, and the take-up of

fixed broadband subscriptions for speeds over

100 Mbps is only 53.4%). The high prices of

gigabit services are an issue, given the low

purchasing power of the average user.

Bulgaria is taking steps to improve its digital

infrastructure.

Bulgaria’s

recovery and resilience

plan (RRP) includes a significant investment in the

‘large-scale

deployment of digital infrastructure on

the territory of Bulgaria’, with a measure to

accelerate its efforts in connectivity and coverage.

In particular, it will support the deployment of

VHCNs (with a focus on sparsely populated,

remote and rural areas) with a planned budget of

EUR 270 million (BGN 528 million) from the

Recovery and Resilience Facility.

(

) European Investment Bank,

EIB investment survey 2024,

based on interviews carried out between April and July 2024.

(

) Eurobarometer,

Businesses’ attitudes

towards corruption in

the EU in 2024,

July 2024.

( )

https://lpi.worldbank.org/international/scorecard.

(

) The best performing country was Singapore, which had an

index value of 4.6.

Graph A4.1:

Making Business Easier: selected

indicators.

(1) Regulatory

burden

Regulation as a major

obstacle to investment

24.5

17.4

(2) Single

Market

41.6

EU Trade Integration

33.1

(3) Shortages

Material shortages as a

factor limiting production

7.2

16.6

from public entities

15.3

47.9

from private entities

27.7

Share (%)

EU27

Share of (1) enterprises, (2) average intra-EU exports and

imports in GDP, (3) firms, (4) SMEs.

Source:

(1) EIB IS, (2) Eurostat, (3) ECFIN BCS, (4) SAFE

survey.

Bulgaria has a well-developed and growing

connectivity infrastructure with a high

internet penetration rate and widely

available broadband services (especially in

urban areas

–

but rural areas lack coverage).

Bulgaria’s households have a high fibre-coverage

for premises, with 88.6% connected (much higher

than the EU average of 64%). However, Bulgaria’s

5G-coverage and take-up of high-speed

broadband remain below the EU averages (5G

covers only 70.9% of populated areas vs. 89% for

the EU, and the take-up of fixed broadband

subscriptions for speeds over 100 Mbps is only

53.4% vs. 65.9% for the EU). The high prices of

gigabit services are an issue, given the low

purchasing power of the average user.

Bulgaria has made regulatory progress on

cybersecurity but continues to face high

cybersecurity risks.

83.2% of enterprises had

deployed some ICT security measures in 2022

(below the EU average of 92.8%) and 48.6% had

made their employees aware of their obligations in

ICT-security-related issues (significantly below the

EU average of 60%). In 2024, 1.8% of enterprises

kom (2025) 0202 - Ingen titel

reported ICT security incidents caused by external

cyberattacks (below the EU average of 3.4%).

Regulatory and administrative

barriers

Bulgarian businesses face considerable

administrative pressure and regulatory

burden.

Fewer firms than in the rest of the EU

considered regulations as a major obstacle to

investment (54% vs 66%) (

), but businesses that

responded to a national survey (

) cited

bureaucracy and regulatory burden (60%), often-

changing regulation (47%) and corruption (47%)

as the biggest barriers to business development.

The OECD’s economy-wide

Product Market

Regulation (PMR) indicator improved for Bulgaria

between 2018 and 2024 and is now, with a value

of 1.3, close to the EU average of 1.2 (

). However,

Bulgaria ranks second lowest for the PMR sub-

component ‘administrative requirements for

limited liability companies’. In particular,

according

to the OECD analysis, setting up a new firm is

regulation-intensive. Improvements could be

achieved by combining/digitising administrative

processes for starting a business.

Bulgaria’s 2021-2027

national strategy for

small and medium-sized enterprises focuses

specifically

entrepreneurship

and

entrepreneurial skills.

The proposed measures

include entrepreneurial education (also targeting

schools and universities), and support for family

businesses, crafts and other niche entrepreneurial

activities. Despite political uncertainty, annual

programmes that follow up and specify concrete

measures are regularly set up by the Ministry of

Economy and Industry in cooperation with

concerned ministries (e.g. the Ministry of Education

and Science). The latest implementation report

cites various events, training courses and

conferences to support businesses, as well as

target and performance indicators.

Bulgaria has transposed the Restructuring

and Insolvency Directive, but the impact on

Bulgaria’s business dynamism needs to be

further monitored.

According to the OECD (

)

and World Bank (

), Bulgaria scores low for its

insolvency framework in several areas: the

de jure

regulatory framework, the institutional and

operational infrastructure, and time/cost required

for the procedures. Changes to the Bulgarian

Commercial Act in 2023 and secondary legislation

are

intended

improve

long-standing

shortcomings in Bulgaria’s insolvency

and

restructuring regime. This reform and measures to

implement the legislation are part of the Bulgarian

RRP.

Business registrations declined across all

sectors by an aggregate total of 24.6%

during the COVID-19 year of 2020, but the

2024 data show a rather mixed performance.

Business registrations were mainly driven by a

dynamic information and communication sector,

where business registrations increased by 46%

(year on year), followed by accommodation and

food service activities (33%). By contrast, business

registrations in the industry and construction

activities fell substantially by 14.5% and 53.3%

respectively. Overall, bankruptcies increased only

slightly, mainly driven by the wholesale/retail and

transport sectors.

Tax compliance costs are close to the EU

average and tax administration is operating

in general efficiently, with possibilities to

improve (see the Annex 2).

For Bulgarian SMEs,

the total cost of tax compliance for both direct and

indirect taxes was on average 1.6% of turnover in

2019 (below the EU aggregate mean of 1.9%) (

In terms of operational efficiency (including the

time and functionality of the process of paying

taxes, as well as the financial burden on firms),

Bulgaria performed relatively well with a score of

71.6% (slightly below Estonia (72.0) but much

better than Romania (61.5)). There is nevertheless

room for improvement in public tax services

(specifically developing integrated digital services

(

)

EIB Investment Survey 2024: European Union overview,

p. 26.

(

) Bulgarian Industrial Association:

https://www.bia-

bg.com/uploads/gallery/-

%20ANKETI/Anketa_2024/ANKETA_2024.pdf

(

) Lower index values of the PMR indicate a more favourable

regulatory environment.

(

) OECD,

Enhancing insolvency frameworks to support

economic renewal,

8/12/2022.

( ) World Bank,

Business Ready,

2024.

(

)

Tax compliance costs for SME,

European Commission,

1/2022, p. 38.

kom (2025) 0202 - Ingen titel

for taxpayers, improving tax audits and the

transparency of the administration) (

Single market

Bulgaria is relatively well integrated into the

single market, but its participation in global

production processes is slowing down (

Bulgarian trade integration in goods was 26.7% of

GDP in 2024 (slightly lower than the EU average

of 27.4%) but trade in goods has slowed down in

recent years. Trade in services is gradually picking

up but remains only at 6.5% of GDP (far below the

EU average of 14.7%). Economic ties in terms of

trade and investments with Germany, Romania

and Italy are significant for Bulgarian

businesses (

Some administrative barriers to trade have

been removed by Bulgaria in recent years,

but there is still scope for further

improvement.

According to the OECD trade

facilitation indicator, Bulgaria’s score

improved

from 1.53 in 2019 to 0.92 in 2023, so still worse

than EU average of 0.69 (

Bulgaria’s lower

performance in international trade than peer

countries (e.g. Romania, Hungary and Greece) in

the World Bank’s ‘Business ready’ survey reflects

several shortcomings in the quality of public

services’ facilitation of international trade. The lack

of integrated digital services and insufficient trade

infrastructure means that there is a need for

further development (

). Bulgaria has recently

joined the Schengen area and this could encourage

further progress by the administration and

stimulate business and investment activities.

Bulgaria has made some progress in enacting

single market legislation but it continues to

struggle with fully and accurately enacting it

as reflected in several single market

enforcement indicators (

). The transposition

(

) World Bank,

Business Ready,

2024.

(

) Magistretti, G. and Vassileva, I. (2024). Bulgaria in Global

Value Chains: Leveraging Integration with the EU, IMF

selected issues, SIP/2024/023.

( ) Eurostat.

(

) See

OECD Product Market Regulation indicators:

low-levels of

the indicator signify a more favourable state of the

regulatory environment for competition.

(

) World Bank,

Business Ready,

2024.

(

) Single Market Scoreboard, 2024.

deficit (which measures the percentage of all

directives not transposed into national law) has

decreased to 1.6%, but this is still well above the

EU average of 0.8%. In addition, there is a large

number of directives whose transposition is (long)

overdue. Bulgaria is also reducing the number of

incorrectly transposed directives (as can be seen

from the conformity deficit, which decreased

to1.3% in 2024 from 1.6% in 2023 (in 2024 the

EU average was 0.9%). Bulgaria still ranks 25

out

of the 27 EU Member States on the transposition

deficit and 22nd for the conformity deficit. The

high number of pending infringement cases

continues to hamper businesses, especially in the

digital economy, transport, and goods and public

procurement (

). Bulgaria resolved 92.3% of the

SOLVIT (

) cases it handled as lead centre in 2024

(the EU average was 84.9%).

Several professional services are more

strictly regulated than in the other EU

countries.

According

the

European

Commission ( ) and the OECD ( ), regulatory

barriers remain higher in Bulgaria than in

comparable countries for lawyers, notaries,

architects and civil engineers. Those barriers

mostly take the form of shareholding

requirements, obligatory fees and company form

restrictions (

). Exclusive rights for these

professions

remain

broad,

harming

the

development of innovative services. According to

the OECD, the barriers to entry in service sectors

were as high in early 2023 as in 2019.

Public procurement

Bulgaria has made some progress in

reforming its regulatory framework in public

procurement but a lack of competition

(

) European Commission, 2023

Annual Report on monitoring

the application of EU law,

2024.

( ) SOLVIT is a service to help businesses and citizens in the

event of an EU Member State other than their own breaching

EU law.

(

) European Commission,

Communication from the Commission

to the European Parliament, the Council, the European

Economic and Social Committee and the Committee of the

Regions of 9 July 2021 on taking stock of and updating the

reform recommendations for regulation in professional

services of 2017,

COM (2021)385 final.

( )

OECD, Product Market Regulation (PMR) indicators: How does

Bulgaria compare?

OECD, 2024.

( ) European Commission, COM (2021)385 final.

kom (2025) 0202 - Ingen titel

remains a concern.

In 2024, competition in

Bulgaria’s public procurement remains restricted,

as evidenced by several indicators. In particular,

the single bids indicator (which represents the

number of procedures where the contract was

awarded to the sole bidder) reached 36% (37% in

2023). Furthermore, a significant proportion of

contracts (31%) were unsuccessful (

), while 21%

of contracts were awarded without competition

through a negotiated procedure without prior

publication.

Businesses express concerns about public

procurement procedures and these concerns

are confirmed by this year’s OECD PMR

indicator.

In a national survey by the Bulgarian

Industrial Association, only 21% of the

respondents confirmed that they participated in

tender procedures in 2024 (compared with 29% in

2023). The most common problems encountered

by participants are the biased setting of conditions

by a contractor (26%), the biased evaluation of

tenders (21%) and an incorrect requirement to

provide data already known to the contracting

authorities (19%). According to the OECD indicator

on public procurement (

), tender procedures in

Bulgaria are

de jure

less favourable to competition

than in the rest of the EU (

). The challenges in the

public procurement system also impact the quality

of infrastructure mentioned above.

Bulgaria

encourages

sustainable

procurement, but an integrated approach

based on stable legislation would be a major

improvement.

Bulgaria has set up different

action plans (e.g. the transition to a circular

economy or the national environmental strategy,

which contain elements on green procurement,

such as guidelines, optional trainings and online

information tools) (

). Implementation challenges

remain, due to the lack of professionalisation and

capacity of public procurement staff and

insufficient strategic planning by public buyers.

(

) No tenders or requests to participate were received or all

were rejected; or other reasons of not successful contracting.

(

) See

OECD Product Market Regulation indicators:

low-level

indicators, barriers to trade

–

facilitation and tariff barriers.

( )

Bulgaria’s index value is 0.8, the EU average is 0.5.

(

) European Commission,

Article 83

–

public procurement

monitoring reporting,

2021-2023.

kom (2025) 0202 - Ingen titel

Table A4.1:

Making business easier: indicators

Bulgaria

POLICY AREA

INDICATOR NAME

2020

Investment climate

Material shortage, firms facing constraints, %

Shortages

Labour shortage, firms facing constraints, %

Vacancy rate, vacant posts as a % of all

available ones (vacant + occupied)

Transport infrastructure as an obstacle to

investment, % of firms reporting it as a major

obstacle

Infrastructure

VHCN coverage, %

FTTP coverage, %

5G coverage, %

4.4

29.6

0.6

7.3

29.5

0.7

12.3

34.9

0.8

11.6

36.7

0.7

7.2

39.1

0.7

10.0

20.2

2.3

2021

2022

2023

2024

EU-27

average

18.5

19.2

81.4

40.1

30.8

85.6

67.2

25.9

88.6

70.9

28.3

13.4

78.8

64.0

89.3

Reduction of regulatory and administrative barriers

Impact of regulation on long-term investment,

Regulatory environment

% firms reporting business regulation as a

20.6

24.9

19.6

major obstacle

Payment gap - corporates B2B, difference in

17.0

14.1

14.0

days between offered and actual payment

Payment gap - public sector, difference in days

25.3

9.9

15.4

between offered and actual payment

Late payments

Share of SMEs

experiencing late

payments, %*

from public or private

entities in the last 6

months

from private entities

in the previous or

current quarter

from public entities in

the previous or

current quarter

21.4

17.4

24.5

17.0

19.0

30.7

16.0

19.7

15.6

15.1

30.3

32.4

25.1

27.7

47.9

15.3

16.6

Integration

Single Market

EU trade integration, % (Average intra-EU

34.2

imports + average intra EU exports)/GDP

EEA Services Trade Restrictiveness Index

Transposition deficit, % of all directives not

transposed

Conformity deficit, % of all directives

transposed incorrectly

SOLVIT, % resolution rate per country

Number of pending infringement proceedings

1.6

1.9

100

42.0

37.3

2.2

2.1

95.0

38.0

40.9

1.8

2.0

100

38.0

36.2

1.7

1.6

100

36.0

33.1

1.6

1.3

92.3

31.0

41.6

0.050

0.8

0.9

84.9

24.4

Compliance

Public procurement

Single bids, % of total contractors**

Competition and

transparency in public

procurement

Direct awards, %**

7.0

*Change in methodology in 2024: reporting late payments from public and private entities separately.

**The 2024 data on single bids is provisional and subject to revision. Please note that approximately 19% of the total data is

currently missing, which may impact the accuracy and completeness of the information. Due to missing data, the EU average of

direct awards data is calculated without Romania.

Source:

(1) ECFIN BCS, (2) Eurostat, (3) EIB IS, (4) Digital Decade country reports; target = 100%, (5) Intrum Payment Report, (6)

SAFE survey, (7) OECD, (8) up to 2023: Single Market and Competitiveness Scoreboard, 2024: Public procurement data space

(PPDS).

kom (2025) 0202 - Ingen titel

ANNEX 5: CAPITAL MARKETS, FINANCIAL STABILITY AND ACCESS TO FINANCE

The low reliance on listed shares and bonds

for

raising finance

underscores the

underdeveloped state of Bulgaria's capital

markets and highlights the need for reforms.

Retail participation (

) in capital markets remains

weak, while institutional investors place most of

their assets in foreign securities. At the same time,

the Bulgarian banking sector, which is profitable,

very liquid, and adequately capitalized, is the main

source for finance for Bulgarian non-financial

corporations (NFCs). However, innovative start-ups

with limited or no credit history often struggle to

secure bank funding. The amount of capital

invested by Private Equity (PE) and Venture Capital

(VC) investors is increasing, but from a very low

base, leaving a significant funding gap for startups

and innovative firms.

domestic economic conditions, investment climate

and government borrowing needs.

Graph A5.1:

Net savings-investment balance

25 % of GDP

-5

-10

2017

2018

2019

2020

2021

2022

2023

Private investment, net

Private saving, net

Borrowing from the rest of the world

Lending to the government

Private saving, gross

Source:

AMECO.

Availability and use of domestic

savings

Domestic net private savings in Bulgaria

have been exceeding the sum of net private

investment and the amount lent to the

government over the past few years, making

Bulgaria a lender of capital to the

international community.

Over the last decade,

the gross savings rate of the private sector in

Bulgaria has hovered around 20% of its gross

domestic product (GDP), which stands below the

euro area average of 23.8%. Approximately half of

it finances fixed capital consumption, hence the

country’s net private

savings ratio, on average, is

around 10%. The net private investment position

has averaged around 6% over the past five years.

(see Graph A5.1). This level allows part of the

savings either be lent to the government in

Bulgaria or the rest of the world. Lending to the

government has shown variability, fluctuating

between negative and positive values. Domestic

capital markets are underdeveloped and not very

appealing to locals. As a result, Bulgaria has been

a net lender to the international community over

the past few years. On average, Bulgaria is lending

around 2.8% of its GDP to the rest of the world,

subject to some fluctuations influenced by its

Bulgaria's net international investment

position (NIIP) has steadily improved over

the past few years but remains negative.

the past, Bulgaria accumulated significant foreign

debt and thus exhibited a material negative NIIP

that stood at -43.5% of GDP in 2017. The

decrease in net foreign liabilities, driven mostly by

a decrease in net foreign direct investments (FDIs)

and net other investments, were the main drivers

to this improved NIIP position, which by September

2024, improved by 90% compared to 2017 and

stood at -4.7% of GDP (see Graph A5.2). Overall,

the Bulgarian economy is well integrated in

international capital flows, and its improving NIIP

position indicates progress towards reducing its

reliance on foreign capital. Nevertheless, despite

being a net lender in recent years, Bulgaria's NIIP

remains negative, reflecting past reliance on

foreign capital, mostly via non-market channels

like FDIs.

Graph A5.2:

International investment position

150

% of GDP

100

-50

-100

-150

2017

2018

2019

2020

2021

2022

2023

2024-Q3

Foreign Direct Investment, Assets

Other investment, Assets

Foreign Direct Investment, Liabilities

Other investment, Liabilities

Portfolio Investment, Assets

Official reserve assets

Portfolio Investment, Liabilities

NIIP

(

) Throughout this annex,

“retail

participation” refers to the

involvement of individual (non-institutional) investors in

capital markets.

Source:

ECB.

kom (2025) 0202 - Ingen titel

Structure of the capital markets and

size of the financial sector

The Bulgarian capital markets remain small

and play a limited role in financing domestic

firms.

The market-funding ratio, which

encompasses funds raised through equity markets

(stocks), debt markets (bonds) and other market

instruments (including venture capital and private

equity funds) has been declining in recent years. In

December 2023, this ratio stood at 11.3% of GDP,

down from 11.7% in 2022 and 12.3% in 2021. It

is one of the three lowest in the EU, significantly

lagging behind the EU average of 49.6% (as

shown in Table A5.1).

Bulgaria's equity market is inefficient and

underutilised, despite having the necessary

infrastructure in place.

The Bulgarian Stock

Exchange (BSE) plays a critical role in facilitating

market transactions through its structured main

and alternative markets (

). In September 2024,

the BSE’s market capitalisation was equivalent to

just 8.4% of GDP, significantly below the EU

average of 69%. The size and the liquidity of the

capital market deter corporates from seeking

public equity financing on the stock exchange. The

inclusion of new issuers and capital raised through

different segments of the BSE and the SME

Growth market BEAM (

), reflects ongoing efforts

increase

market-based

funding.

The

development of BEAM underscores the benefits of

simplifying SME listing requirements, thereby

enhancing access to capital markets for growing

businesses. However, the lack of market depth,

high listing costs, and the overall higher perceived

risks associated with traded stocks in Bulgaria -

partly rooted in legacy issues (

) - continue to

drive investors away from the BSE. These issues

contribute to the persistent inefficiency and

underutilisation of the BSE.

Bulgarian corporates face challenges in

accessing financing through the domestic

(

) See

BSE Sofia market segmentation

(

) The

SME growth market, the Bulgarian Enterprise Accelerator

Market

(widely known as the BEAM), was set up in 2018 and

is a specific category of multilateral trading facility,

introduced under the EU’s MiFID II framework, designed to

support SMEs in accessing capital, imposing lighter

regulatory requirements than the main market.

(

) Sofix, the BSE's major index, lost almost 87% of its market

capitalisation between October 2008 and February 2009.

debt capital market.

Government debt issuance

in Bulgaria is primarily conducted on international

markets, with only a quarter of the outstanding

amount issued domestically (

). This has a ripple

effect on corporate bond issuance, as investors

struggle to establish reliable benchmarks to price

corporate bonds. Other reasons the Bulgarian

companies underutilise corporate bonds include

the ease of bank financing, limited knowledge of

the bond-issuance process, and relatively high

associated costs of bond issuance. Nonetheless,

bond issuances have nearly doubled in recent

years, suggesting growing momentum for

corporate bond financing, albeit from a very low

base.

Graph A5.3:

Capital markets and financial

intermediation

120

100

Insurance corporations

% of GDP

MFIs

Insurance and pension funds

Non-financial corporations

Financial corporations

Listed equity

Bonds

Assets by sector

Source:

ECB, EIOPA, AMECO.

The Bulgarian authorities recognise the

importance of capital-market development

and have made it a priority.

A recent EU-

funded project assessed the Bulgarian capital

markets and identified key barriers to growth,

resulting in 60 recommended actions (

). Barriers

to the growth of Bulgaria’s capital markets include:

(i) low trust due to legacy issues; (ii) a limited

asset base; (iii) minimal free floats; and (iv) the

higher cost and complexity of market financing

compared with bank loans. Studies have also

highlighted areas for improvement in the country’s

institutional framework (

) and in financial

(

) See

Central Government Debt and Guarantees Monthly

Bulletin for November 2024.

(

) See

Diagnostic of the State of Development of the Bulgarian

Capital Market.

( ) According to the World Bank's

Worldwide Governance

Indicators,

Bulgaria is one of the three worst performers in

the EU-27 in the areas of government effectiveness, political

Other financials

MFIs

Government

kom (2025) 0202 - Ingen titel

literacy, both of which may pose challenges to

further progress.

The government’s commitment

to the successful implementation of the

recommended actions is key to fostering market

development. The country must be ready to fully

capitalise on its upcoming adoption of the euro,

which represents a significant opportunity to

attract increased investment and accelerate

growth in Bulgaria’s capital markets.

Resilience of the banking sector

Bulgaria’s banking sector plays a crucial role

in financing the economy, despite its

relatively small size.

In December 2024, there

were 23 banks operating in Bulgaria (

). The total

amount of assets of the banking system increased

by 11.4% to EUR 98 billion (

), compared to a

year earlier. The size of the banking sector in

Bulgaria, at 94% of GDP, is relatively small

compared with the EU average, which stands at

248% of GDP (as shown in Table A5.1). The four

largest banks held approximately 69% of all

banking assets, indicating a high degree of

concentration, given that the EU average is 54%.

The market share of the 12 less significant

institutions stood at approximately 29%. The six

foreign credit institutions from EU and non-EU

member states operating via branches in Bulgaria

had a market share of less than 3% (

). The four

significant institutions are directly supervised by

the European Central Bank (ECB) and the rest by

the Bulgarian National Bank, under the oversight

of the ECB. Commercial banks in Bulgaria are

mostly foreign owned. Domestic ownership in

banks comprises approximately one-fifth of the

total banking sector assets. The Bulgarian

Development Bank is the only State-controlled

bank in the country.

In 2024, Bulgarian banks maintained the high

profitability level achieved in the previous

stability, rule of law, regulatory quality, control of corruption,

and voice and accountability.

( ) See Bulgarian National Bank, December 2024,

Data of the

banking system

( ) The Bulgarian lev (BGN) has been pegged to the euro at an

exchange rate of 1 euro = 1.95583 leva since the

introduction of the euro on 1

January 1999. This Annex

uses the euro equivalent throughout.

(

)

See Bulgarian National Bank’s

Banks in Bulgaria - quarterly

bulletin

year, driven predominantly by high level of

net interest income and net fee, and also by

commission income.

The former rose by almost

15% year-on-year, largely due to strong

contribution of interest income from both the

household and NFCs’ sectors.

Additionally, net fee

and commission income also contributed to the

total operating profit, marking a 8.9% year-on-

year increase. However, impairments increased

substantially, rising by 60% from the previous

year. However, as the asset quality does not

appear to have deteriorated during the year (refer

to paragraph on asset quality), the additional

provisions are attributed to the banks' efforts to

clean up their balance sheets and proactively

curtail the creation of new non-performing loans

(NPLs) stemming from macroprudential risks. The

increase in administrative expenses by 12.2%, and

in staff expenses by 13.8%, are consistent with

the growth of the assets on the balance sheet, and

the rising salary levels in the country, respectively

(

). As a result, the Bulgarian banking sector

exhibited strong profitability in 2024, achieving a

net profit after tax of EUR 1.9 bn, which represents

an 8.1% increase over the previous year.

Consequently, the cost-to-income ratio remained

low at 38.2%, with the return-on-equity (RoE) at

15.7% (

). Both metrics compare favourably with

the corresponding EU averages of 53% and 10%,

respectively.

The Bulgarian banking sector is well-

capitalized and liquid.

The capital position of the

banking system remained solid, despite the growth

in risk-weighted assets resulting from the credit

expansion. Own funds rose to EUR 10.7 billion in

December 2024 (from EUR 9.3 billion a year

earlier), driven by organic capital generation from

higher profits. The Common Equity Tier 1 (CET1)

capital ratio stood at 22.1% (

), well above the

regulatory minimum, indicating strong financial

health. This is also thanks to a consistent policy by

the Bulgarian National Bank to maintain high

capital buffer requirements, including a

countercyclical buffer rate incrementally raised to

2% and a systemic risk buffer of 3%, applicable to

all institutions authorised in Bulgaria. Furthermore,

the sector is cash-rich, with a liquidity coverage

ratio (LCR) of 244%, and a net stable funding ratio

(

) See Bulgarian National Bank, December 2024,

Data of the

banking system

(

) Annualised ECB data, Q3 2024, refer to Table A5.1

(

) Annualised ECB data, Q3 2024, refer to Table A5.1

kom (2025) 0202 - Ingen titel

of 162%, which remain among the highest in the

EU (

). In 2024, Bulgarian banks issued securities

eligible for the Minimum Requirement for own

funds and Eligible Liabilities (MREL), increasing

their average MREL level to 30.4% of Total Risk-

Exposed Amount (TREA) by June 2024, further

closing the shortfall to the binding target to

approximately EUR 0.4 billion (3.5% of TREA) (

The asset quality did not show signs of

deterioration, despite the growth in lending,

but the non-performing loans (NPLs) ratio

remains higher than the EU average.

In Q3-

2024, the NPL ratio fell to 3% from more than

10% in 2017. Despite the significant progress, this

level is above the EU average of 1.9% (as shown

in Table A5.1). Notwithstanding the significant

credit growth, the nominal amount of NPLs

decreased by 1% to EUR 1.9 billion, which

indicates that the credit quality did not deteriorate

in the year. Moreover, the coverage ratio of gross

non-performing loans was 47.8%, indicating

sufficient provisions to cover potential losses.

The banking sector's challenges and risks to

financial stability remain largely unchanged

from last year.

The main concerns stem from

external economic uncertainties, which could

negatively impact asset quality if economic

conditions worsen. Also, lending activity in the

private sector remained elevated during 2024. This

prolonged period of high credit growth, fuelled by

increased household demand due to rising

disposable income and low interest rates, raises

concerns about credit risk and potential real estate

market overheating. Other emerging risks, include

climate and cybersecurity threats for which banks

remain vigilant. To preserve the resilience of the

banking system in the context of increasing

medium-term cyclical risks, the Bulgarian National

Bank

introduced

borrower-based-measures,

effective from 1 October 2024 (

100

) (

101

Resilience of the non-bank financial

intermediaries

The non-bank credit sector has been growing

rapidly in Bulgaria over the last few years.

Credit issued by corporations specialising in

lending has increased by around 22% on an

annual basis since 2022 and reached EUR 3.2 bn

(

102

). As a result of the strong credit activity by

these credit corporations, the level of consumer

loans in the sector’s balance sheet in September

2024 was roughly one fifth of the consumer credit

held in the banking sector’s balance sheet.

Corporations specialising in lending also lend to

NFCs, but this segment is not their main focus. The

non-bank sector has self-organised to uphold best

practices (

103

), including preventing fraudulent

practices from taking place.

The Bulgarian insurance market remains

significantly smaller than the EU average.

September 2024, the Bulgarian insurance market

comprised 46 active insurance companies (

104

General insurance companies manage assets of

EUR 4.1 billion, while life insurance companies

manage EUR 1.7 billion. The market is relatively

small, with total assets equivalent to less than

6.2% of GDP, significantly below the EU average

of 54.8% (as shown in Table A5.1). The Bulgarian

insurance and pensions industry is overseen by the

Financial Supervision Commission. Post-ERM II

commitments in the area of non-bank financial

sector have been fully addressed, with new

regulations introduced to enhance supervisory

effectiveness. As of December 2023, the industry's

equity capital was EUR 1.94 billion and technical

reserves were EUR 2.81 billion, with a relatively

robust solvency ratio of 187.4%, which is however

below the EU average of 258.6%.

Bulgaria's second and third pillar pension

funds are growing strongly and are projected

to expand further as wages increase.

addition to the first pillar pension system

administered by the National Social Security

Institute, Bulgaria offers four supplementary

pension funds under the second pillar and third

(

102

)

See Bulgarian National Bank’s

Statistical Press Releases on

non-bank corporations

specialising in lending.

103

( ) See

АОНК | Association for Responsible Non-Banking

Lending.

104

( ) See the

ECB's list of insurance corporations.

(

) See

EBA’s

Risk Dashboard - Q4 2024

(

) See

EBA’s

MREL dashboard - Q2 2024

(

100

) See

Bulgarian National Bank’s

press release about the

introduction of

borrower-based measures.

101

( ) In March 2025, based on statistics from Q4 2024, the

Bulgarian National Bank issued a

press release

that

measures have had an effect on an effect on lending.

kom (2025) 0202 - Ingen titel

pillar (

105

). In March 2024, the net assets under

management by the four pension funds amounted

EUR 12.2 billion

(

106

)

compared

with

EUR 11.7 billion in December 2023 (and

EUR 9.8 billion in end-2022), clear evidence that

the sector is growing.

Bulgaria's investment-fund sector is modest,

but gradually expanding.

In 2024, the sector

played a rather minor role in the broader financial

system, compared to banking and non-bank

financial institutions. In December 2024, 1 628

funds were operating in Bulgaria, of which the

resident (local) investment funds were 150 (112

UCITS and 38 alternative investment funds). The

total assets under management by Bulgarian

investment funds amounted to EUR 1.9 billion,

equivalent to around 2% of 2024 GDP (

107

). This

size is comparable to that of several euro-area

countries with smaller financial sectors. In

addition, foreign funds distributed in Bulgaria,

managed an additional EUR 4.1 billion of assets.

The total amount of assets under management of

both resident and non-resident investment funds

increased by EUR 1 billion (21%). Investment

funds are continuously expanding the range of

alternative investment opportunities they offer,

and as a result, the sector is expected to grow

further in the coming years.

of financing, such as unlisted equity or

partnerships, account for 67% of total financing in

Bulgaria, far exceeding the EU average of 45%.

Consequently, the level of financing through the

capital markets in Bulgaria is significantly lower

than the EU average. In particular, bond issuance

and listed shares play a minor role in NFC

financing in Bulgaria. Bond issuance accounts for

only 1% of total financing, and listed shares

account for less than 2%, significantly below the

EU averages of 5% and 19%, respectively.

Graph A5.4:

Composition of NFC funding as a % of

GDP

250

200

% of GDP

150

100

Loans

Listed shares

Trade credit and advances

Unlisted shares

Bonds

Other equity

(1) Reference period is end-2023

Source:

Eurostat

Sources of business funding and the

role of banks

Bulgarian corporates rely on bank finance

through loans or internal resources to cover

their funding needs, and they tend to avoid

tapping the capital markets.

Bank finance

through loans accounts for approximately a

quarter of Bulgarian NFCs’ total financing

needs,

similar to the EU average. In contrast, other forms

(

105

) The second pillar is a defined contribution system and is

mandatory for individuals born after 1959 and comprises (i)

the Universal Pension Funds, which has the largest share

(c.80%) of insured persons; and (ii) the Occupational Pension

Funds (PPFs) for individuals working in hazardous professions

that are typically allowed to retire earlier. The third pillar is a

voluntary defined contribution system and comprises: (i) the

Voluntary Pension Funds; and (ii) the Voluntary Pension

Funds under Professional Schemes.

106

( ) See

Bulgaria’s

Financial Supervision Commission’s

Results of

the supplementary pension insurance activity for 2023.

107

( )

See Bulgarian National Bank’s

Investment Funds Statistics.

The

Bulgarian

banking

sector

has

experienced rapid growth in lending over the

past several years.

After a period of subdued

lending activity that lasted until 2017, banks in

Bulgaria began to actively expand their lending

portfolios. Their focus has been on mortgage

lending, but they have also channelled funds to

NFCs. Several factors have contributed to this

growth, including low interest rates (

108

), abundant

liquidity in the banking system, rapid increases in

incomes, and positive consumer sentiment. In

September 2024, this trend of loan growth

continued, with the total amount of loans for

households growing by 21.3% year on year, while

loans to NFCs increased by 9.1% (as shown in

Table A5.1).

Bulgarian corporates are expected to

continue to have relatively easy access to

(

108

) The Bulgarian lev is fixed to the euro, but the transmission of

the ECB's monetary tightening in recent years was very weak

in Bulgaria, especially

for the households’ sector, due to

abundant liquidity and the resulting very low rates on

deposits.

kom (2025) 0202 - Ingen titel

funding in the future.

The strong liquidity in the

banking system, and the relatively low loan-to-

deposit (LTD) ratio (

109

) suggests that there is

sufficient headroom for additional lending should

banks maintain their appetite for extending credit.

According to the European Investment Bank’s

CESEE Bank Lending Survey (

110

), credit demand in

Bulgaria is expected to stagnate in the coming

months, and credit supply might even tighten.

Nevertheless, the conditions faced by corporates

seeking to access funding are projected to remain

good. Accordingly, businesses are unlikely to face

significant challenges in securing stable and

affordable bank loans in the near term. However,

firms with no credit history, such as innovative

start-ups, may still encounter difficulties.

Graph A5.5:

Composition of HH financial assets per

capita ('000 EUR) and as a % of GDP

200

150

100

250

per capita (000 EUR) (lhs)

Currency and deposits

Investment funds

Listed shares

Other equity

% of GDP (rhs)

Insurance and pension funds

Bonds

Unlisted shares

HH Debt (liability)

(1) Reference period is end-2023.

Source:

Eurostat.

The participation of retail investors in

capital markets

Bulgarians take a conservative approach to

managing their financial assets, with a

strong preference for deposits.

The amount of

financial assets per capita in Bulgaria is

EUR 21 000, which is 25% of the average in the

EU-27. Bulgarian households hold around a third

of their financial assets in currency and deposits,

similar to the EU average. In contrast, Bulgarians

allocate a significantly lower proportion of their

financial assets to insurance and pension funds

than the EU average (Bulgarians allocate 10%

against an EU average of 28%). Furthermore, they

have minimal exposure to investment funds,

bonds, and listed shares, with a cumulative

exposure of just over 3%, compared to 18% in the

EU (as shown in Graph A5.5).

Promoting alternative investment products

and incentivising retail participation is

essential to

further develop Bulgaria’s

capital markets.

Households tend to prioritise

liquidity over more complex financial investments.

Lower income levels in the country hamper the

ability of poorer households to save and invest.

Other factors, such as fewer market offerings,

and the need to further increase financial literacy

may also contribute to this investing behaviour.

Nevertheless, given the rising levels of average

income, a comprehensive review of existing

incentives to promote retail participation is

warranted. Building trust in the market is crucial,

and maintaining compliance with sound corporate

governance practices is essential to this end. To

incentivise retail participation in capital markets,

policymakers could introduce tax breaks for long-

term investments and develop tax-advantaged

investment savings accounts for households.

The role of domestic institutional

investors

Insurance companies in Bulgaria exhibit a

conservative investment strategy, with a

limited allocation to local corporate bonds

and shares.

Insurance companies in Bulgaria

allocate only 14% of their assets to corporate

bonds (of which only 1% is allocated to locally

issued corporate bonds) and 26% to shares (of

which only 7% is allocated to local shares). About

47% of their assets are allocated to government

(

109

)

The banking system’s LTD

ratio rose to 73% in June 2024

but remained below the EU average of 95%, giving Bulgaria

the 11th lowest LTD ratio in the EU-27.

110

( )

European Investment Bank’s

Central, Eastern and South-

Eastern Europe (CESEE) Bank Lending Survey of second half

of 2024

kom (2025) 0202 - Ingen titel

bonds. Notably, 35% of all insurance assets are

invested in Bulgaria, 55% in other EU countries,

and the rest outside Europe.

Bulgaria's pension funds have a substantial

presence in the country's financial market,

with a large proportion of their assets

invested abroad.

Most of the sector’s

EUR 11.71 billion net assets under management in

December 2023, were allocated to foreign assets.

Of those, 70% are invested in foreign government

bonds and foreign shares. The remaining amount

is invested domestically, and approximately half is

placed in deposits or invested in government

securities (

111

Investment funds' role in financing the

economy remains modest.

The assets of

resident investment funds are allocated 62% to

equity funds, 24% to bond funds, and the rest to

mixed and other funds. The currency breakdown of

resident investment funds' assets showed a

prevailing share of assets denominated in BGN

(63%) and in EUR (32%) (

112

approximately 60% of the EU average for VC fund

investment (as shown in Table A5.1). Moreover,

VCs in Bulgaria focus more on early-stage

businesses, which is positive for innovation but

may pose challenges when scaling start-ups to

more mature businesses (

114

). Furthermore, VC

funds active in Bulgaria face several challenges in

attracting funds from local institutional investors.

These challenges include legal or regulatory

constraints on the investments of pension funds,

which limit exposure to PE and VC (

115

The growth of Bulgaria’s start-up

ecosystem

in the past few years has been mainly driven

by public institutional support, injecting

capital inflows.

The European Investment Bank

and the European Investment Fund are both

actively involved in the development of Bulgarian

capital markets. They provide advisory services

and financial instruments to improve market

infrastructure and increase the capacity of local

financial institutions. Two distinct entities, the

Fund of Funds (FoF) (

116

) and the Recovery Equity

Fund of Funds (REF) (

117

), each with specific

objectives and funding sources, operate with the

aim of increasing access to finance for Bulgarian

businesses, including innovative firms and start-

ups.

The depth of venture and growth

capital

Despite growth in the past five years, local

private-equity (PE) and venture-capital (VC)

markets remain too small to meet the

financing needs of innovative firms.

PE and

VC are valuable sources of finance for companies

as they grow, providing finance and offering

useful guidance to management. In Bulgaria, the

amount of capital invested by VC and PE firms is

on a growing trajectory since 2019, and by 2023

the country has increased its investment value

fourfold (

113

). However, despite their potential, both

sources of finance remain limited in Bulgaria

compared with elsewhere in the EU. In December

2023, the average annual PE investment in

Bulgaria as a percentage of GDP was 0.06%,

significantly lower than the 0.41% average in the

EU. The average VC investment was even smaller,

equivalent to less than 0.03% of GDP, which is

(

111

) See

Bulgaria’s

Financial Supervision Commission’s

Results of

the supplementary pension insurance activity for 2023.

112

( ) See Bulgarian

National Bank’s

Investment Funds Statistics.

(

113

) See Bulgarian Private Equity and Venture Capital Association,

2024,

Private Investment in Bulgaria & South Eastern Europe

Financing the green transition

Bulgaria

has

not

yet

issued

any

Environmental, Social, and Governance

related (ESG) bond.

Despite efforts to integrate

sustainable finance practices by adhering to

broader EU directives and strategies, Bulgaria is

one of the two EU countries with no ESG bond

issuance (

118

). However, driven by regulatory

requirements and market pressures, Bulgarian

financial institutions are increasingly incorporating

environmental, social, and governance factors into

their operations. Efforts to promote green

financing in Bulgaria stem primarily from public

initiatives, particularly those outlined in Bulgaria's

(

114

) See also Annex 1: Innovation to Business.

(

115

) See

2024 Survey of Investment Regulation of Pension

Providers.

(

116

) See

Fund of Funds | FMFIB.

(

117

) See

Recovery Equity Fund of Funds of Bulgaria.

(

118

) Refer to Association for Financial Markets in Europe (AMFE’s)

Capital Markets Union Key Performance Indicators

–

Seventh

Edition November 2024

kom (2025) 0202 - Ingen titel

Table A5.1:

Financial sector indicators

Total assets of MFIs (% of GDP)

Common Equity Tier 1 ratio

Total capital adequacy ratio

Overall NPL ratio (% of all loans)

NPL (% loans to NFC-Non financial corporations)

NPL (% loans to HH-Households)

NPL-Non performing loans coverage ratio

Return on equity

Loans to NFCs (% of GDP)

Loans to HHs (% of GDP)

NFC credit annual % growth

HH credit annual % growth

Stock market capitalisation (% of GDP)

Initial public offerings (% of GDP)

Market funding ratio

Private equity (% of GDP)

Venture capital (% of GDP)

Financial literacy (composite)

Bonds (as % of HH financial assets)

Listed shares (as % of HH financial assets)

Investment funds (as % of HH financial assets)

Insurance/pension funds (as % of HH financial assets)

Total assets of all insurers (% of GDP)

11-17

18-24

25-27

1-3

4-10

Banking sector

2017

101.6

20.2

21.8

10.2

17.3

11.4

50.6

2018

101.8

19.3

20.6

7.7

12.7

9.0

52.7

2019

100.4

18.4

19.5

6.5

10.7

7.2

48.3

2020

107.2

22.0

23.1

5.9

9.6

7.3

48.2

2021

100.9

22.0

22.9

4.8

7.6

5.8

49.7

2022

95.3

20.4

21.3

3.7

6.5

4.0

49.8

2023

95.3

20.5

22.1

2.9

5.1

3.0

49.2

16.3

24.1

20.7

8.8

16.8

9.2

0.03

11.3

0.06

0.03

43.5

0.5

1.8

0.9

10.3

6.1

2024-Q3

94.0

22.1

23.8

3.0

5.2

2.9

47.8

15.7

23.8

22.3

9.1

21.3

8.4

6.2

248.4

16.6

20.1

1.9

3.5

2.2

42.1

10.0

30.0

44.5

0.8

0.7

69.3

0.05

49.6

0.41

0.05

45.5

2.7

4.8

10.0

27.8

54.8

10.2

11.8

11.2

4.9

8.8

11.2

30.4

30.0

29.1

29.7

27.0

24.7

19.1

19.9

21.1

20.7

19.7

4.8

8.6

7.6

4.0

5.7

11.1

8.9

9.1

10.6

7.6

14.5

16.0

10.1

11.1

9.2

0.00

0.20

0.00

0.01

0.21

0.17

17.0

15.4

15.3

13.6

12.3

11.7

0.03

0.02

0.04

0.05

0.01

0.03

0.01

0.4

0.2

0.3

0.2

1.9

1.8

1.9

1.8

1.7

0.7

0.8

1.0

0.9

11.1

11.4

12.1

12.6

10.9

9.6

6.6

6.8

7.5

7.3

5.9

Colours indicate performance ranking among 27 EU Member States.

Non-banks sector

Annualised data.

Credit growth and pension funds EU data refers to the EA average.

Source:

ECB, Eurostat, EIOPA, DG FISMA CMU Dashboard, AMECO.

Recovery and Resilience Plan. Nevertheless, the

scale of climate investment required cannot be

met by public funding alone. Developing the

capital market, including the creation of a

functioning green bond market, is important for

boosting climate-related investment in Bulgaria

and attracting private investors.

Financial literacy

The relatively low level of financial

literacy (

119

) in Bulgaria hinders the growth

of capital markets, although recent

initiatives show promise in educating and

engaging

market

participants.

Many

households remain unaware of alternative

investment options, while businesses often lack an

understanding of the potential benefits of capital-

market finance. However, there has been an

enthusiastic response from SMEs to the BEAM

market and from retail investors to international

investment opportunities via the MTF BSE

International (

120

). This indicates that there is

sufficient knowledge to support the organic growth

(

119

) See

Eurobarometer-Monitoring the level of financial literacy

in the EU.

120

( ) For more, see

MTF BSE International.

of the market at its current stage. In recent years,

institutions and market participants have launched

numerous initiatives to increase financial literacy,

including in capital markets. The national strategy

for financial literacy, adopted by Bulgaria’s

government in 2021, accompanied by an action

plan that outlines priority activities until 2025 (

121

is a step in the right direction. However, this

strategy and its action plan are not yet fully

implemented, and therefore their effectiveness is

yet to be proven. After an assessment of the

implementation of the strategy and the first action

plan, a new Action Plan 2026-2030 is planned to

be elaborated and implemented.

(

121

) See

National Strategy for Financial Literacy and its Action

Plan (2021-2025).

kom (2025) 0202 - Ingen titel

ANNEX 6: EFFECTIVE INSTITUTIONAL FRAMEWORK

Bulgaria’s

institutional framework

influences

its competitiveness.

Trust in public institutions is

very low. Inconsistent regulatory practices, slow

implementation of administrative simplification

measures and quality of justice remain a

challenge. Corruption is perceived as a problem for

doing business in the country. Low skills and pay

disparities in the public administration affect its

productivity. Bulgaria has made notable progress

in delivering digital public services to businesses.

However, uptake by citizens remains low.

Quality of legislation and regulatory

simplification

Bulgaria’s performance in drafting and

evaluating legislation aligns with the EU

average.

The country has established a detailed

methodology and set of rules for assessing

impacts of both primary and secondary legislation.

However, these practices are not consistently

applied (

124

). There is also well-established practice

for public consultations of government initiatives.

Evaluations of existing laws however are relatively

rare. In 2024, a series of measures were

implemented to enhance strategic planning,

monitor policy implementation, and utilize

evidence, data, and innovative methods in

policymaking. These measures complement IT

investments for improved strategic planning under

the national recovery and resilience plan. A newly

adopted concept aims to strengthen regulatory

governance by applying the regulatory standards

at local level (

125

Graph A6.2:

Indicators of Regulatory Policy and

Governance (iREG)

Public perceptions

Graph A6.1:

Trust in justice, regional / local

authorities and in government

0.7

0.6

0.5

0.4

0.3

0.2

0.1

Spring

Summer

Autumn

Spring

Winter

Autumn

4.0

3.5

3.0

2.5

2.0

1.5

1.0

2014 2015

2016

2017

2018

2019 2020 2022

2023

2024

Justice, legal system EU27

Justice, legal system BG

Regional or local public authorities EU27

Regional or local public authorities BG

Government EU27

Government BG

(1) EU27 from 2019; EU28 before

Source:

Standard Eurobarometer surveys

0.5

0.0

Primary laws Subordinate Primary laws Subordinate Primary laws Subordinate

regulations

BG_Stakeholder

engagement

BG_Regulatory Impact

Assessment

BG_Ex-post evaluation of

legislation

Trust in Bulgaria’s public institutions is far

below the EU average

(Graph A6.1). Although

trust in local and regional governments is higher,

their perceived quality continues to be rated the

lowest in the EU (

122

). 46% of citizens believe that

reducing bureaucracy would enhance trust in

public administration (compared to the EU's 52%),

38% expect more transparency (compared to the

EU's 44%), and 34% desire better-skilled civil

servants (compared to the EU's 30%) (

123

Methodology

Transparency

2021

Systematic adoption

Oversight and quality control

EU-27

Source:

OECD (2025), Regulatory Policy Outlook 2025 and

Better Regulation across the European Union 2025

(forthcoming).

(

122

)

Inforegio - European Quality of Government Index

(

123

)

Understanding Europeans’ views on reform needs

- April

2023 - - Eurobarometer survey

(

124

)

See 2024, Годише�½ доклад за оце�½ка �½а въздействието

през 2023 г. p. 6.

(

125

)

Ко�½цепция за развитие �½а регулатор�½ата политика �½а

Република България 2025-2027.

kom (2025) 0202 - Ingen titel

Table A6.1:

Selected indicators on administrative burden reduction and simplification

Ex ante impact assessment of legislation

When developing new legislation, regulators are

required to …

Ex post evaluation of legislation

Is required to consider the consistency of regulations

and address areas of duplication.

Is required to contain an assessment of administrative

burdens.

Is required to contain an assessment of substantive

compliance costs.

Compares the impact of the existing regulation to

alternative options.

Periodic ex post evaluation of existing regulations is

mandatory.

Government uses stock-flow linkage rules when

introducing new regulations (e.g., one-in one-out).

A standing body has published an in-depth review of

specific regulatory areas in the last 3 years.

In the last 5 years, public stocktakes have invited

businesses and citizens to assess the effectiveness,

efficiency, and burdens of legislation.

Identify and assess the impacts of the baseline or

‘do nothing’ option.

Identify and assess the impacts of alternative non-

regulatory options.

Quantify administrative burdens of new

regulations.

Quantify substantial costs of compliance of new

regulations.

Assess macroeconomic costs of new regulations.

Assess the level of compliance.

Identify and assess potential enforcement

mechanisms.

Yes / For all primary laws

For major primary laws

For some primary laws

No / Never

(1) This table presents a subset of iREG indicators focusing on regulatory costs. The indicators refer to primary legislation.

Source:

OECD (2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the

European Union 2025 (forthcoming).

Bulgaria has not consistently used tools for

regulatory simplification

such as in-depth

reviews of specific regulatory areas and

assessments of administrative burdens and

substantive compliance costs when developing and

evaluating legislation (Table A6.1). A government

plan aims to reduce administrative burdens in the

areas of health, education, energy, agriculture,

trade, infrastructure, the environment and public

safety (

126

). In early 2025, the government also

committed to simplify administrative services

related to 10 life events, connected to the EU

Single Digital Gateway (

127

Efforts to improve the law-making practices

in the parliament have not shown results yet.

While parliament retains a leading role in

legislative initiative (in 2024 80% of proposals

were submitted by members of parliament) the

share of impact assessments and public

consultations of these remains extremely low (

128

Only a small share of legislative proposals made

use of evidence or assess alignment with EU

(

126

)

Пла�½ за �½амалява�½е �½а адми�½истратив�½ата тежест

(

127

)

Пла�½ за действие за в�½едрява�½е �½а услуги �½а при�½ципа

„епизод от живота“

(

128

)

2024. Изследва�½е �½а зако�½одател�½ата дей�½ост �½а 50-

ото �½арод�½о събра�½ие

legislation. Stakeholders have also reported

problems with transparency of the Bulgarian

parliament (

129

Social dialogue

The involvement of the social partners in

national legislation and policymaking is

institutionalised in the National Council for

Tripartite Cooperation and in the sectoral,

branch, regional and municipal councils for

tripartite cooperation.

All councils include the

nationally represented trade unions and

employers’ organisations who are recognised in

this capacity by the government in accordance

with a special procedure laid down in the national

labour legislation. The consultation of the National

Council is required by law and covers legislative

initiatives and secondary legislation on labour and

issues directly related to labour, social security, as

(

129

) See 2024 Rule of Law Report, country chapter on Bulgaria,

pp. 33-34.

kom (2025) 0202 - Ingen titel

well as issues related to the standard of living.

(

130

)

Overall, trade union membership has seen a

decline in the last decades with some

estimates putting it at 15% of the labour

force.(

131

) The influence of trade unions is further

undermined by the low coverage of collective

labour agreements. Employers generally prefer

direct company level negotiations over sector-wide

agreements, limiting the potential for broader

wage

improvements.

Operation

‘Social

partnership’, with a budget of approximately EUR

26.6 million, under the programme for Human

Resources Development 2021-2027 co-funded by

the ESF+ is supporting social partners, aiming to

strengthen the social dialogue and increase

collective bargaining.

there is scope for further aligning national

practices in Bulgaria with the guidance to support

faster and shorter procedures for the licensing of

renewable energy projects. Unlike 19 other EU

Member States, Bulgaria does not have a

dedicated institution for promoting pro-

productivity policies. Furthermore, a significant

number of independent and regulatory authorities

are operating with an expired mandate (

133

Digital public services

Bulgaria has a strong legal framework for

supporting online digital services and a well-

developed e-government architecture.

It has

been working to digitalise its administrative

registers, increase interoperability and enable the

administrative transfer of data (once-only

principle).

Only a small percentage of Bulgarian

internet users engage with e-government

services.

At just 35.4% engagement, this is the

second lowest in the EU and significantly below

the EU average of 75% (Table A6.2) Reasons for

this according to a

national study

from 2023,

include distrust in electronic services and concerns

about weak information security, lack of adequate

computer skills, insufficient promotion of services.

Moreover, insufficient digital inclusion of

minorities and people living in remote areas is a

further obstacle to online services. Bulgaria had an

overall e-health maturity score of 77.2 out of 100

in 2023, close to the EU average of 79.1.

The national scheme for eID is still in

development.

However, regulatory changes

introduced in 2023 are significantly improving the

situation. As of 2023, 6.09% of Bulgarians had

used one of the existing eID systems to access

online services for private purposes within the past

12 months, compared to an EU average of

41.11%. Use of eID for accessing services

provided by national public authorities or public

Efficiency of selected administrative

procedures

The OECD product market regulation

indicators show that Bulgaria’s licensing

system is less burdensome than in the

average EU-27 economy.

However, there is still

scope to continue adopting best practice. Although

the government keeps an up-to-date inventory of

all permits and licences required/issued to

businesses by public bodies, the inventory is not

available online for consultation. Also, there is no

requirement for the government to regularly

assess whether such licences and permits are still

required or should be withdrawn (see also Annex

4). According to a Commission report on speeding

up permit-granting procedures for renewable

energy and related infrastructure projects (

132

)

(

130

) For an analysis of the involvement of

Bulgaria’s

social

partners at national level in the European Semester and the

Recovery and Resilience Facility, see Eurofound (2025),

National-level social governance of the European Semester

and the Recovery and Resilience Facility.

(

131

) See

Развитие �½а си�½дикализма в историческа

перспектива. Преглед �½а прав�½ия, политическия и

социал�½ия ко�½текст �½а фу�½кцио�½ира�½е �½а съвреме�½�½ите

си�½дикал�½и

орга�½изации

–

Ко�½федерация

�½а

�½езависимите си�½дикати в България (КНСБ).

( ) European

Commission:

Directorate-General

for

Energy,

Monitoring the implementation of the Commission

recommendation and guidance on speeding up permit-

granting procedures for renewable energy and related

132

infrastructure projects

–

Final report,

Publications Office of

the European Union, 2025,

link.

(

133

) See 2024 Rule of Law Report, country chapter on Bulgaria,

pp. 31-32.

kom (2025) 0202 - Ingen titel

Table A6.2:

Key Digital Decade targets monitored through the Digital Economy and Society Index

Bulgaria

2022

Digitalisation of public services

Digital public services for citizens

Score (0 to 100)

EU-27

2024

2023

2022

2024

2023

Digital Decade

target by 2030

EU-27

100

2030

100

2030

100

2030

2021

Digital public services for businesses

Score (0 to 100)

2021

2022

2023

Access to e-health records

Score (0 to 100)

2021

2022

2023

Source:

State of the Digital Decade report 2024(

135

)

services was slightly lower at 5.36%, which is well

below the EU average of 36.14%.

Bulgaria is developing the necessary

infrastructure towards seamless, automated

exchange of authentic documents and data

across the EU.

There are still additional steps to

be taken by Bulgaria to become technically ready

to connect to the Once-Only Technical System(

134

part of the EU Single Digital Gateway.

Administration has expanded its training catalogue

to include digital skills, strategic planning and

monitoring, public procurement, service delivery,

etc. (

138

The

attractiveness

the

public

administration as an employer is declining.

This was demonstrated by a visible shift towards

an older age profile in the civil service as of 2019

and a lower number of applications for vacancies

published in 2023. About half of vacant posts in

the administration were filled via internal mobility.

The existing civil service traineeship scheme had

not improved recruitment of young talent and was

therefore replaced by a new programme for young

jobseekers with a university education (

139

). The

starting salary in the public administration is equal

to the national minimal wage. There continue to be

huge disparities in pay across administrations

between persons with the same function and

grade, despite several proposals to address the

issue (

140

). Moreover, a national review showed

that the current bonus system tended to inflate

the number of vacant posts, this leaving more

funds for top-ups from budget savings. Finally,

although staff engagement is monitored (

141

), the

results do not feed into consistent staff policies.

Civil service

Bulgaria’s civil service

continues to face

difficulties in ensuring civil servants have

sufficient skills.

Enrolment of civil servants in

adult learning is significantly below the EU

average (BG 2.3%; EU 17.9%)(

136

). The

participation rate in compulsory induction training

courses has continued to decline both among civil

servants (from 49.1% in 2022 to 46.7% in 2023)

and managers (46.3% in 2023 to 37% in 2022). In

2023, 36% of administrations had not earmarked

any funding for training. On a more positive note,

the total number of participants in professional

training courses, including courses on digital skills

had increased (

137

). The Institute for Public

(

134

) European Commission,

The Once Only Principle System: A

breakthrough for the EU’s Digital Single Market

(

135

)

Digital Decade DESI indicators 2024

(

136

) Eurostat. Data to be updated and refernce to be included in

April

( ) Reports on the status of the state administration for 2022

and 2023,

https://strategy.bg/FileHandler.ashx?fileId=36619

137

(

138

) Annual report of the Institute for public administration, 2024,

https://www.ipa.government.bg/sites/default/files/annualrepo

rt_ipa_24_fpi_final.pdf

(

139

)

Програма "Старт в кариерата"

(

140

)

Портал за обществе�½и ко�½султации

(

141

) Institute for Public Administration, Engagement barometer,

https://www.ipa.government.bg/bg/publications#cbp=/bg/baro

metr-na-angazhiranostta-2024

kom (2025) 0202 - Ingen titel

Integrity

A far higher percentage of companies than

the EU average consider corruption to be

widespread and a problem when doing

business, and there are concerns related to

high-level corruption cases.

In particular, 88%

of companies consider that corruption is

widespread (EU average 65%), while 57% consider

that corruption is a problem when doing business

(EU average 36%) (

142

). Moreover, only 14% of

companies believe that people and businesses

caught for bribing a senior official are

appropriately punished (EU average 31%) (

143

There has been no progress yet in establishing a

robust track-record of high-level corruption cases

or in work to strengthen the legislative framework

in the area of foreign bribery in line with OECD

recommendations. Following the reform of

Bulgaria’s

Commission

for

Counteracting

Corruption and Illegal Assets Forfeiture, the

collegial leadership of the Anti-Corruption

Commission has not yet been appointed and its

performance remains to be assessed (

144

Moreover, there are continued gaps in the integrity

framework for persons in top executive functions,

with no clear integrity standards for the

government and no appropriate sanctioning

mechanism. The government has started work on

a comprehensive code of conduct (

145

Public procurement remains an area at high

risk of corruption in Bulgaria.

36% of

companies (EU average 27%) think that corruption

has prevented them from winning a public tender

or a public procurement contract in practice in the

last three years (

146

). Bulgarian public procurement

legislation was amended in October 2023 to

improve transparency and integrity. Investigations

and legal proceedings concerning Bulgarian

citizenship previously granted under the country’s

investor citizenship scheme, abolished in 2022,

(

142

) Flash Eurobarometer 543 on businesses’ attitudes towards

corruption in the EU (2024).

(

143

) Ibid.

(

144

) See 2024 Rule of Law Report, country chapter on Bulgaria,

pp. 16-18.

(

145

) Ibid., pp. 21-22.

(

146

) Flash Eurobarometer 543 on businesses’

attitudes towards

corruption in the EU (2024).

continued in 2023. Even after their abolition,

investor citizenship schemes also continue to

expose a high-risk of corruption, as new

allegations emerged, including corruption and

fraud to avoid proper due diligence in the granting

of citizenship. (

147

)

Bulgaria has not implemented a public

However, work on

legislation to make lobbying more transparent has

started and rules on ‘revolving doors’ have been

reformed. The government has prepared a concept

paper and set up a working group to prepare

legislation aiming to define lobbying and set up a

transparency register (

148

). This could help to

improve transparency in corporate lobbying.

Justice

The justice system is performing efficiently

overall.

For the first time, Bulgaria was able to

collect and present disaggregated data on the

efficiency of first instance civil and commercial

proceedings. The estimated time to resolve such

cases was 186 days in 2023. The estimated time

to resolve administrative cases at first instance

has decreased from 129 days in 2022 to 121

days in 2023. The justice system is faced with

some challenges regarding digitalisation. Despite a

slight improvement, digital tools are scarcely used

in courts. Concerns regarding judicial independence

persist. In December 2023, a comprehensive

constitutional reform was adopted to improve

judicial independence and address long-standing

concerns. However, on 26 July 2024, Bulgaria’s

Constitutional Court declared a significant part of

the constitutional amendments unconstitutional.

Therefore, the concerns regarding the composition

and functioning of the Supreme Judicial Council

persist. In addition, long-term secondments of

judges are widely used to fill vacant positions.

Moreover, the risk of political influence of the

Inspectorate to the Supreme Judicial Council could

(

147

) See 2024 Rule of Law Report, country chapter on Bulgaria,

pp. 25-26.

(

148

) Ibid., pp. 23-24.

kom (2025) 0202 - Ingen titel

be avoided, in particular by involving judicial

bodies in the selection of its members (

149

(

149

) For more detailed analysis of the performance of the justice

system in Bulgaria, see the upcoming 2025 EU Justice

Scoreboard and the 2024 Rule of Law Report.

kom (2025) 0202 - Ingen titel

SUSTAINABILITY

ANNEX 7: CLEAN INDUSTRY AND CLIMATE MITIGATION

Bulgaria

faces

significant

challenges

regarding its clean industry transition and

climate mitigation:

to date, it has limited

manufacturing capacity for net-zero technologies,

while obstacles remain in streamlining industrial

permitting. Its reliance on imports for many critical

raw materials and a low circular material use rate

threaten its industrial autonomy. Despite some

progress in decarbonizing, its industry has

remained greenhouse gas emissions intensive so

far, and air quality is a significant concern.

Furthermore, Bulgaria is lagging behind in waste

management.

Despite

Bulgaria’s

reliance

landfilling, a positive development is that Bulgaria

closed its substandard landfills. This annex reviews

the areas in need of urgent attention in Belgium’s

clean industry transition and climate mitigation,

looking at different dimensions.

net zero technologies; promoting the purchase of

net zero technologies with financial compensation:

building a skilled workforce; and establishing

industrial parks. In addition, Bulgaria’s Ministry of

the Economy and Industry is currently working on

an industrial strategy for the processing and

mining industries. Lastly,

relevant

skills

programmes provide vocational training that could

potentially benefit a range of net-zero

technologies.

The procedure for industrial permitting can

vary in length depending on the location and

the authorities involved.

In fact, the time

needed to obtain a construction permit for net-

zero manufacturing can vary between six months

and three years. So far, Bulgaria has not

established a one-stop shop to streamline the

process. The Investment Promotion Act offers

support to projects that meet specific

requirements for investment size and job creation

thresholds. Further incentives for such projects

could be beneficial: for example, faster

administrative procedures, financial assistance

and tax relief. While this measure is not

specifically targeted at net zero technologies, net

zero projects can also benefit from these

favourable conditions (

151

Transforming the car industry

The automotive sector is one of the fastest-

growing sectors in Bulgaria with an average

annual growth in production of 8.6%.

80% of

all sensors of European cars were made in

Bulgaria. The sector includes not only plants for

vehicle parts but also 38 research and

development centres with innovation capacity for

software and design development. At the same

time, the automotive industry is heavily dependent

on other countries, such as Germany.

Bulgaria’s transition to e-vehicle

(EV) use

and

charging

infrastructure

progressing.

In 2023, the stock of cars with

alternative fuel engines was the highest among EU

Member States, at 14.3% compared to an EU

average of 4.6%. The public recharging

infrastructure is expected to continue growing,

reaching an estimated 1 543 charging stations in

(

151

) European Commission: Directorate-General for Energy, 2025.

Strategic autonomy and technology

for the green transition

Net zero industry

Bulgaria’s

manufacturing capacity across all

net zero technologies is very limited, despite

plans to develop the batteries sector

(

150

Some recent investments in battery and storage

technologies include EUR 1.1 billion of planned

investment by Belgium-based ABEE for a research

and development centre, a gigafactory and a

recycling centre. The South African company solar

MD plans to invest EUR 1.53 million for a battery

factory in Bulgaria.

Bulgaria’s scale up of clean tech

manufacturing capacity is supported by only

a few and high-level policy frameworks.

Bulgaria’s draft national energy and climate plan

provides a strategy for stimulating the

manufacturing of net-zero technologies. The

proposed measures include: improving the

conditions for investment in net zero technologies;

improving the permitting procedures for strategic

(

150

) European Commission: Directorate-General

for Energy, ‘The

net-zero manufacturing industry landscape across the

Member

States

2025’,

https://data.europa.eu/doi/10.2833/2181110.

kom (2025) 0202 - Ingen titel

2024, according to Statista Market Insights. This

represents a significant expansion of the country's

charging network, which has already seen rapid

growth in previous years. However, legislative and

infrastructure challenges remain, for example,

insufficient grid capacity and uneven geographical

distribution of charging infrastructure, including

fast chargers (

152

Romania and Lithuania (

155

). To become more raw

materials independent, Bulgaria could further

diversity its supply sources. The circular use of

materials is also key to reducing the dependence

on imports. In this regard, over the last decade,

Bulgaria’s circular material use rate (4.9%) has

been constantly way below the EU average

(11.8%), indicating a significant potential for

improvement.

Bulgaria's

mining

and

metallurgical

industries have the potential to contribute to

the EU's raw material independence and

meet some of its critical raw material needs.

According to the Bulgarian Association of the

Metallurgical Industry, Bulgaria's polymetallic

deposits contain primary metals and other

elements which are processed into concentrates or

remain in mining waste. The metallurgical industry

processes over 1.6 million tonnes of non-ferrous

metal ore concentrates and waste products,

making effective use of primary elements and

accompanying metals.

Bulgaria could take advantage of the Critical

Raw Materials Act in the production of

primary and secondary non-ferrous metals.

However, Bulgaria has fallen behind on some

obligations under the Act, such as the obligation to

prepare a database on critical raw materials and

establish an information and project support unit.

The Bulgarian Academy of Sciences has been

tasked with the establishment of a national

scientific programme to support the development

of critical and strategic raw materials, but the long

implementation period may diminish potential

benefits (

156

Critical raw materials

Mining and metallurgy play a crucial role in

Bulgaria’s industrial sector.

The extraction and

recycling of critical raw materials is governed by

the 2021-2028 national waste management plan,

the 2022-2027 circular economy transition

strategy and the related strategy action plan

(Decision No 832 of the Council of Ministers of

26 October 2022). One of the objectives of the

strategy is to strengthen Bulgaria’s position as a

supplier of critical raw materials in the EU. This is

to be supported by a planned national critical raw

materials strategy and an act on critical raw

materials.

Bulgaria depends on imports for many of the

critical raw materials needed for the

development of net-zero industry.

Bulgaria

produces critical raw materials such as baryte,

bismuth and copper. It ranks among the top three

EU producers of vermiculite, gold, kaolin, cadmium,

lead, and ornamental and building stones (

153

). A

significant number of other raw materials need to

be imported. For example, high-value imports

include copper (from Indonesia, Brazil, Georgia,

Turkey, Peru, Chile and Panama), iron and non-

alloy steel (mainly from Ukraine); aluminium

(mainly from Turkey); and fertilisers (from Egypt,

and Georgia). Bulgaria’s

level of import

dependency for raw materials (

154

) is below the EU

average (0.19 vs 0.23) and on a par with that of

(

152

)

SeeNext, ‘Automotive Industry in Southeast Europe, Powering

up for an electric future”, 2024.

(

153

) European Commission,

Raw Materials Information System

(RMIS)

–

Country Profile - Bulgaria

(

154

) The concentration index score shows how much a country

relies on a number of partner countries for a basket of

critical raw materials. Higher values indicate higher import

dependency: a score of 0.25 indicates a high dependency,

0.15-0.25 indicates a moderate degree, and a score below

0.15 indicates low import dependency.

Climate mitigation

Industry decarbonisation

Bulgaria’s manufacturing sector emits much

more greenhouse gases per unit produce

than other EU Member States.

Around 18% of

Bulgaria’s total greenhouse emissions come from

(

155

) European Commission, 2025

Competitiveness Scoreboard.

(

156

) Bulgarian Association

https://bami.bg/en/

the

Single

Market

and

Metallurgical

Industry,

kom (2025) 0202 - Ingen titel

manufacturing (

157

). In 2022, this sector emitted

790 g CO

eq of greenhouse gases per euro of

gross value added (GVA), nearly three times the EU

average (270 g), ranking it second highest among

EU Members. The emissions intensity of Bulgaria’s

manufacturing sector has declined by 21% since

2017, similar to the EU average decrease. The

shares of Bulgaria’s manufacturing emissions

coming from energy and non-energy-related

sources in 2023 (the latter primarily coming from

industrial processes) are relatively equal, while in

the EU overall, energy-related emissions dominate,

with 57%.

Graph A7.1:

GHG emission intensity of manu-

facturing and energy-intensive sectors, 2022

The energy intensity of manufacturing in

Bulgaria decreased

by about 31% between

2017 and 2022, to 2.45 GWh/EUR of GVA, though

it remains much higher than the EU average, 1.05

GWh. The share of electricity and renewables in

final energy consumption of the manufacturing

industry has remained at around 39%. A sustained

shift from fossil fuels to electricity and renewables

is yet to build momentum.

Graph A7.2:

Manufacturing industry production:

total and selected sectors, index (2021 = 100),

2017-2023

120

115

110

105

100

KG CO

eq / €

C-C19

C17

Bulgaria

C20

EU-27

C23

C24

2017

2018

2019

2020

2021

2022

2023

Manufacturing

Manufacture of paper and paper products

Source:

Eurostat.

Manufacture of chemicals and chemical products

Manufacture of other non-metallic mineral products

The energy-related greenhouse gas emissions

intensity of manufacturing has increased

recently.

Between, 2017 and 2022, the intensity

of greenhouse emissions from industrial processes

and product use declined by 24%, more than in

the EU as a whole, where it decreased by 19%. At

the same time, the energy-related greenhouse gas

emissions intensity of

Bulgaria’s manufacturing

industry increased by 6%, while the EU overall saw

a decrease of 11% (

158

Manufacture of basic metals

Source:

Eurostat.

Bulgaria’s energy-intensive

industries are

greenhouse gas emissions intensive.

Energy-

intensive industries (

159

) accounted for 17% of

Bulgaria’s total manufacturing GVA in 2022, the

third highest share in the EU. Among these, the

manufacturing of chemicals and chemical

products (which accounts for 4.6% of

manufacturing production) recorded the highest

emission intensity of production in the EU, with

5.8 kg CO2eq/EUR of GVA.

the NACE C and E sectors, excluding C-19. GVA data (in the

denominator for both intensities) are aligned with this

sectoral coverage. Therefore, they are not fully consistent

with the data referred to in other part of this section.

(

159

) Notably, the manufacture of paper and paper products

(NACE division C17), of chemicals and chemical products

(C20), “other” non-metallic

mineral products (C23; this

division includes manufacturing activities related to a single

substance of mineral origin, such as glass, ceramic products,

tiles, and cement and plaster), and basic metals (C24). To

date, these industries are energy-intensive

–

i.e. consuming

much energy both on site and/or in the form of purchased

electricity

–

and greenhouse gas emissions intensive, in

various combinations.

(

157

)

In 2023. Manufacturing includes all divisions of the “C”

section of the NACE Rev. 2 statistical classification of

economic activities. In the remainder of this section, unless

indicated otherwise, data on manufacturing refer to the

divisions of the NACE section C excluding division C19

(manufacture of coke and refined petroleum products), and

the year 2022. The source of all data in this section is

Eurostat; data following the UNFCCC Common Reporting

Framework (CRF) are from the European Environment Agency

(EEA), republished by Eurostat.

(

158

) For the GHG emissions intensity of GVA related to energy use

and industrial processes and product use respectively, GHG

emissions are from inventory data in line with the UNFCCC

Common Reporting Format (CRF), notably referring to the

source sectors CRF1.A.2

–

fuel combustion in manufacturing

industries and construction and CRF2

–

industrial processes

and product use. The CRF1.A.2 data broadly correspond to

kom (2025) 0202 - Ingen titel

MtCO2e

Bulgaria’s

energy-intensive

industries

experienced a contraction of production

recently.

Bulgaria’s industrial energy prices are

lower than average EU prices, between 2021 and

2024 (

160

), production in the paper, non-metallic

mineral products, and basic metals sectors still fell

by about 5%-10% (see Graph A7.2).

Bulgaria has started putting in place a

framework to support the decarbonisation of

industry, but more needs to be done.

Bulgaria

has put forward legislation facilitating the

deployment of renewables and storage; measures

to improve energy efficiency of both residential

and manufacturing buildings and pilot projects on

renewable hydrogen. This is also underlined in the

objectives of the integrated national energy and

climate plans as well as key outcomes of the

territorial just transition plans. However, further

efforts are needed to support the decarbonisation

of manufacturing production, particularly in

energy-intensive sectors. Preparations have

started on the development of a national industrial

strategy which will include elements related to

industrial decarbonisation, such as the reduction of

the carbon footprint, resource and energy

efficiency, as well as net zero emissions industry

analysis.

Reduction of emissions in the effort sharing

sectors

Bulgaria is projected to reach its 2030 target

for the effort sharing sectors if it adopts and

implements the planned climate mitigation

measures (

161

GHG emissions from Bulgaria’s

effort-sharing sectors in 2023 are expected to

have been 4.7 % above those of 2005. By 2030,

additional policies currently considered by Bulgaria

are projected to achieve a reduction of 11.06 %.

Hence, Bulgaria is projected to overachieve its

effort sharing target of a 10 % reduction, by

1.06 pps (

162

), if it adopts and implements those

measures.

( ) For a detailed analysis of energy prices, see Annex 8 on the

affordable energy transition.

160

Graph A7.3:

Greenhouse gas emissions in the

effort sharing sectors, 2005 and 2023

2005

Domestic transport (excl. aviation)

Agriculture

Waste

2023

Buildings (under ESR)

Small industry

Source:

European Environment Agency

Swift action on decarbonising transport

appears particularly exigent in Bulgaria.

Between 2005 and 2023, greenhouse gas

emissions from road transport increased by 32%

in Bulgaria, while they decreased by 5% in the EU

overall. Speeding up climate mitigation in this

sector would help protect households, businesses

and transport users in Bulgaria from the impact of

the forthcoming carbon price.

Sustainable industry

Circular economy transition

Despite some positive trends, Bulgaria lags

behind in its circular transition.

The circular

use of materials in Bulgaria reached a peak of

5.8% in 2020 followed by a decline until 2022,

and then an increase to 4.9% in 2023. However,

this is still well below the EU average of 11.8%.

With EUR 0.38 generated per kg of material

consumed in 2023, resource productivity in

Bulgaria is well below the EU average of EUR 2.22

per kg.

There is scope for Bulgaria to implement

additional policies to increase circularity.

October 2022, Bulgaria adopted its strategy and

established in 2027 after a comprehensive review.

Projections on the impact of current policies (‘with existing

measures’, WEM) and additional policies (‘with additional

measures’, WAM) as per Bulgaria’s final updated national

energy and climate plan.

(

161

) The national greenhouse gas emission reduction target is set

out in Regulation (EU) 2023/857 (the Effort Sharing

Regulation). It applies jointly to buildings (heating and

cooling); road transport, agriculture; waste; and small industry

(known as the effort sharing sectors).

(

162

) The emissions from effort sharing sectors for 2023 are

based on approximated inventory data. The final data will be

kom (2025) 0202 - Ingen titel

action plan for the transition to a circular economy

for 2022–2027. The strategy and the

accompanying action plan were adopted under the

wider umbrella of Bulgaria’s national development

programme for 2030, ‘Bulgaria 2030’. The

national development programme shifted the

focus from landfilling to prevention, reuse,

recycling and recovery of waste. The 2021-2028

waste management plan envisages the

implementation of measures included in the

circular economy strategy for products containing

critical raw materials. The Public Procurement Law

has been amended with the inclusion of minimum

environmental requirements in the tender

documentation for all public contracting

authorities. Finally, Council of Ministers’ Decision

No 508 of 18 July 2024 adopted the national

scientific programme ‘Critical and strategic raw

materials for green transition and sustainable

development’, supporting research to explore,

extract in an environmentally sound manner and

process CRMs and strategic raw materials from

various sources, including waste originating from

processing primary raw materials and from

secondary resources (from recycling).

Bulgaria also lags behind in waste

management.

The total amount of waste

generated in Bulgaria has decreased over the last

12 years, with 488 kg of waste produced per

capita in 2022. This trend is primarily driven by

decreases in the largest waste categories, namely

mineral waste from mining and quarrying. If these

categories are excluded, there is an upward trend

in waste generation. While total waste generation

has decoupled from economic growth, total waste

excluding major mineral wastes has increased

more than the economy as measured by GDP

growth. Bulgaria still relies strongly on landfilling

even though the landfilling rate decreased

significantly between 2010 and 2022 reaching

54% in 2022. Municipal waste incineration plays a

minor role in Bulgaria, as only 3% of the

generated municipal waste was incinerated in

2022.

Current investment in the circular transition

is insufficient.

To meet its environmental

objectives on the circular economy and waste,

Bulgaria needs to increase circular economy

investment by an estimated EUR 126 million per

year, with an additional EUR 21 million for waste

management action. To close the circular economy

investment gap, EUR 33 million is needed for

recent initiatives, such as eco-design for

sustainable products; packaging and packaging

waste; labelling and digital tools; critical raw

materials recycling; and measures proposed under

the amended Waste Framework Directive. A

further EUR 93 million is needed to unlock Bulgaria

circular economy potential (

163

Zero-pollution / clean air

Bulgaria has made some progress in reducing

air pollution, but further progress is needed.

Air quality in some parts of Bulgaria continues to

give cause for concern. In 2023, exceedances

above the limit values set by the Ambient Air

Quality Directive were registered for nitrogen

dioxide in one air quality zone and for particulate

matter (PM

) in one air quality zone in Bulgaria.

Furthermore, in one air quality zone, the target

values for ozone concentration were not met.

Bulgaria is above the EU average for

releases of pollutant emissions to air.

Bulgaria has not reduced emissions significantly in

the context of the national air pollution control

programme. The latest reported data show

continued non-compliance with the 2020-2029

emission reduction commitment for NH

. Bulgaria

is also not on track to meet emission reduction

commitments for 2030 onwards for non-methane

volatile organic compounds. Based on the latest

data, Bulgaria has made some progress in

achieving compliance with EU air quality standards

and maintaining downward emission trends.

However, exceedances above limit values and

target values remain for NO

, PM

and ozone.

Since 2019, downward emission trends have been

reported only for NH

and PM

2.5

, for NH

though

levels are still above those in 2005.

The costs of pollution remain high.

The latest

available annual estimates (for 2022) by the

European Environment Agency for Bulgaria

attribute 9 000 deaths each year (or 86 000 years

of life lost (YLL)) to fine particulate matter; 1 500

deaths each year (or 14 100 YLL) to nitrogen

dioxide; and 930 deaths each year (or 9 000 YLL)

to ozone. For 2022, about 3 800 deaths per year

were attributed to fine particulate matter pollution;

450 deaths to nitrogen dioxide, and 980 to ozone.

(

163

) European Commission, DG Environment,

Environmental

investment needs & gaps assessment programme,

2025

update. Expressed in 2022 prices.

kom (2025) 0202 - Ingen titel

To meet its environmental objectives on pollution

prevention and control (towards zero pollution),

Bulgaria needs to provide an additional EUR 406

million per year (0.48% of GDP), mostly for

measures on clean air (

164

(

164

) European Commission, DG Environment,

Environmental

investment needs & gaps assessment programme,

2025

update. Expressed in 2022 prices.

kom (2025) 0202 - Ingen titel

Table A7.1:

Key clean industry and climate mitigation indicators: Bulgaria

Strategic autonomy and technology for the green transition

Net zero industry

Operational manufacturing capacity 2023

- Solar PV (c: cell, w: wafer, m: module), MW

- Wind (b: blade, t: turbine, n: nacelle), MW

Automotive industry transformation

Motorisation rate (passenger cars per 1000 inhabitants), %

New zero-emission vehicles, electricity motor, %

Critical raw materials

Material import dependency, %

Climate mitigation

Industry decarbonisation

GHG emissions intensity of manufacturing production, kg/€

Share of energy-related emissions in industrial GHG emissions

Energy-related GHG emissions intensity of manufacturing

and construction, kg/€

Share of electricity and renewables in final energy consumption

in manufacturing, %

Energy intensity of manufacturing, GWh/€

Share of energy-intensive industries in manufacturing production

GHG emissions intensity of production in sector [...], kg/€

- paper and paper products (NACE C-17)

- chemicals and chemical products (NACE C20)

- other non-metallic mineral products (NACE C23)

- basic metals (NACE C24)

Reduction of effort sharing emissions

GHG emission reductions relative to base year, %

- domestic road transport

- buildings

2005

Effort sharing: GHG emissions, Mt; target, gap, %

Sustainable industry

Circular economy transition

Material footprint, tonnes per person

Circular material use rate, %

Resource productivity, €/kg

Zero pollution industry

Years of life lost due to PM2.5, per 100,000 inhabitants

Air pollution damage cost intensity, per thousand € of GVA

Water pollution intensity, kg weighted by human factors per bn € GVA

1,946

1,641

1,683

1,571

278.4

2.6

1,729

702

571

27.5

0.9

2018

18.4

2.4

0.4

22.3

Bulgaria

2019

20.7

4.0

0.4

2020

20.7

5.8

0.4

2021

21.6

4.3

0.5

2022

24.2

3.0

0.5

2023

21.3

4.9

0.6

1.20

6.02

4.73

1.03

1.16

7.50

4.24

1.00

2018

23.5

-25.6

1.00

5.39

3.81

1.23

2019

25.5

-28.6

1.07

5.39

5.60

1.16

2020

18.1

-28.7

1.09

17.76

5.59

1.06

2021

12.6

27.1

-17.6

2021

25.1

2017

64.9

327.7

37.2

3.74

2018

1.01

59.3

378.9

38.2

3.55

Bulgaria

EU-27

75-125 (m)

2017

410

0.05

2017

2018

416

0.51

2018

15.7

2019

431

0.57

2019

16.4

- Electrolyzer, MW

- battery, MWh

2020

439

1.36

2020

16.0

2021

437

2.25

2021

15.3

2022

449

3.57

2022

17.4

45931

2023

466

4.68

2023

16.1

Trend

2018

539

1.03

2018

24.2

2021

561

8.96

2021

22.6

Bulgaria

2019

0.91

53.5

354.7

39.4

3.35

2020

0.93

52.8

381.0

39.5

3.49

2021

1.05

51.8

446.3

36.9

3.82

2022

0.79

49.8

346.1

39.3

2.88

17.0

1.33

5.76

6.69

0.87

2022

9.9

27.2

-35.4

2022

24.5

1.49

5.28

5.11

1.00

2023

4.9

32.5

-35.4

2023

23.4

2023

0.7

51.2

39.8

2.45

EU-27

2017

0.34

44.8

158.4

43.3

1.29

2022

0.27

42.5

132.9

44.2

1.09

7.3

0.73

1.25

2.53

2.79

2018

1.4

21.4

0.68

1.26

2.24

3.49

2023

5.2

32.9

WAM

1.06

Target

-10.0

Trend

WEM

-19.7

EU-27

2018

14.7

11.6

2.1

2021

15.0

11.1

2.3

Source:

Net zero industry:

European Commission:

The net-zero manufacturing industry landscape across Member States: final

report,

2025.

Automotive industry transformation:

Eurostat.

Critical raw materials:

Eurostat.

Climate mitigation:

See

footnotes in the "climate mitigation" section; reduction of effort sharing emissions:

EEA greenhouse gases data viewer;

European

Commission,

Climate Action Progress Report,

2024.

Sustainable industry:

Years of life lost due to PM2.5: Eurostat and EEA,

Harm to human health from air pollution in Europe: burden of disease status,

2024. Air pollution damage: EEA,

EU large industry

air pollution damage costs intensity,

2024. Emissions covered: As, benzene, Cd, Cr, Hg, NH3, Ni, NMVOC, NOX, Pb, dioxins, PM10,

PAH, SOX. Water pollution intensity: EEA,

EU large industry water pollution intensity,

2024. Releases into water covered from

cadmium, lead, mercury, nickel. Other indicators: Eurostat.

kom (2025) 0202 - Ingen titel

ANNEX 8: AFFORDABLE ENERGY TRANSITION

This annex outlines the progress made

and the ongoing challenges faced in

enhancing energy competitiveness and

affordability,

while

advancing

the

transition to net zero in Bulgaria.

examines the measures and targets proposed

in the final updates to the national energy and

climate plans (NECPs) for 2030.

Bulgaria’s

electricity mix continues to rely

on a high share of fossil fuels, primarily

coal. The country experienced high

electricity prices in 2024 that were partly

due to the low flexibility of the electricity

system and delayed electricity market

liberalisation

well

limited

interconnectivity between South-Eastern

and Central Europe.

Bulgaria has made

significant steps in diversifying away from

Russian fuels but became the only entry point

for Russian pipeline gas into the EU following

the expiry of the Ukraine-Russia agreement for

transit of gas.

Bulgaria’s

electricity

prices

for

households have slightly increased in

2024 but remain the second lowest in the

EU. Gas prices have slightly increased but

are still among the lowest in the EU.

Price

regulation by the National Energy Authority

was in force throughout 2024. The share of

taxes stands at 17% for both electricity and

gas prices which is significantly lower than the

EU average of 25% for electricity and 27% for

gas.

Retail electricity and gas prices for

industrial consumers have declined in

2024 by 14% and 27% respectively and

are among the lowest in the EU.

Fiscal

intervention supports electricity for non-

household consumers, reducing total prices by

more than 11%.

Graph A8.2:

Monthly average day-ahead wholesale

electricity prices and European benchmark

natural gas prices (Dutch TTF)

Energy prices and costs

Graph A8.1:

Retail energy price components for

household and non-household consumers, 2024

(i) the Title Transfer Facility (TTF) is a virtual trading point for

natural gas in the Netherlands. It serves as the primary

benchmark for European natural gas prices.

(ii) CWE and SEE respectively provide average prices in the

central-western European (Belgium, France, Germany,

Luxembourg, the Netherlands and Austria) and south-eastern

European (Bulgaria, Greece and Croatia) markets.

Source:

S&P Platts and ENTSO-E

(i) For household consumers, consumption band is DC for

electricity and D2 for gas. Taxes and levies are shown

including VAT.

(ii) For non-household consumers, consumption band is ID for

electricity and I4 for gas. Taxes and levies are shown

excluding VAT and recoverable charges, as these are typically

recovered by businesses.

Source:

Eurostat

With an average of EUR 102/MWh in

2024 (

165

), Bulgaria had the fourth-highest

wholesale electricity prices in the EU; and,

while prices in Bulgaria declined early in

the year amid falling natural gas costs,

(

165

) Fraunhofer (ENTSO-E data).

kom (2025) 0202 - Ingen titel

they surged during the spring/summer and

again in the winter, diverging from

Central

European

markets.

This

decorrelation was driven by factors affecting

both consumption and generation. Prolonged

and hotter summer heatwaves and a colder

winter in the region led to higher consumption

(+2% in 2024). The supply-demand gap was

exacerbated by lower hydropower and wind

output (-6% (

166

) and -9% in 2024) due to the

meteorological conditions; diminished nuclear

generation due to malfunctions (-4%); lower

coal output (-32%); limited non-fossil flexibility.

This gap was mainly covered by higher imports,

particularly from Greece, Romania and Türkiye,

where costly natural gas-fired generation was

ramped up, especially during peak demand

hours. Consequently (and more than in 2023),

these conditions resulted in concentrated price

spikes in evening hours (18h-21h) when solar

output declined, and demand increased

(especially during the summer). However,

average daytime hourly prices were lower than

in 2023, probably due to the uptake of solar

output in Bulgaria.

2023. Member States should ensure that a

minimum of 70% of technical cross-border

capacity is available for trading. Overall, this

capacity reached satisfactory levels in Bulgaria,

but the Bulgarian Transmission System

Operator (TSO) requested limitations due to the

absence of sufficient congestion management

measures.

Bulgaria

has

complete

the

liberalisation of its wholesale and retail

electricity markets.

The legislation to

liberalise the wholesale market has been

adopted, but its entry into force has been

postponed from July 2024 to July 2025. A

public supply obligation was awarded to the

state-owned coal power plant Maritza East II

without a competitive tender in June 2024 and

was subsequently amended in December 2024

to increase further the amount of electricity

supplied. Bulgaria has taken measures to

liberalise its balancing market for electricity

and joined the PICASSO balancing platform in

February 2025. Until 31 March 2025 a state-

aid scheme offsets industry’s electricity prices

above 90 EUR/MWh. The scheme is funded by

collecting the revenues of inframarginal

electricity producers above a technology-

specific threshold. The scheme may deter long-

term contracts and investment in energy

production and undermines incentives for

energy efficiency and flexibility in the private

sector.

The expansion of Bulgaria’s cross-border

interconnection capacity will, along with

the reinforcement of its national grid,

enable Bulgaria to meet rising energy

demand, integrate renewable energy

production more effectively and enhance

grid flexibility.

The Nea Santa interconnector

between Greece and Bulgaria became

operational in June 2023. Bulgaria has

achieved the 15% interconnection target for

2030 and reports that it already exceeded 20%

in 2024 (

169

). Under its recovery and resilience

plan (RRP), Bulgaria will enable its electricity

transmission system to integrate a cumulative

new 4 500 MW of production capacity from

(

169

) NECP, p. 328.

Flexibility and electricity grids

The widening price gaps between the

South- East Europe (

167

) and CORE

capacity calculation regions (CCRs)

observed during the summer also

highlighted the limited cross-border

capacity available for trade.

Bulgaria is in

the South-East Europe CCR for market-

coupling. Electricity flows in this part of Europe

are influenced by exchanges in nearby bidding

zones, including in the Western Balkan

countries (

168

). The Bulgaria-Greece and

Bulgaria-Romania borders are market-coupled,

and trade levels were consistently high in

(

166

) ENTSO-E.

(

167

) South-East Europe is a capacity calculation region (CCR)

made up of Bulgaria, Greece and Romania. A CCR is a

group of countries that calculate cross-border electricity

trade flows together.

(

168

) The process of integrating them

into the EU’s single

market via market coupling is ongoing.

kom (2025) 0202 - Ingen titel

renewable sources by 31 March 2026 and a

cumulative 1 200 MW of additional net

interconnection capacity with Romania and

Greece

30 June 2025.

Prioritised

implementation of the Project of Common

Interest Carmen Smart Grid will reinforce

cross-border TSO-TSO cooperation and data-

sharing; enhance TSO-DSO cooperation; invest

in grid expansion; increase capacity for

integration of new renewables; and improve

grid stability, security and flexibility.

Bulgaria has made efforts to facilitate

permitting for infrastructure projects but

can take further steps to streamline

procedures and improve the capacity of

local administrations.

Bulgaria applies the

existing legal framework to all projects,

including projects of common interest. Specific

legislation is not in place on new types of

energy projects such as smart electricity and

gas grids, electrolysers, hydrogen and carbon

dioxide. Bulgaria should fully digitalise

permitting procedures; accelerate decision-

making and consent-obtaining processes; and

improve

the

effectiveness

public

participation.

Bulgaria

should

continue

maturing its hydrogen infrastructure planning

and realisation of the interconnection with

Greece (a project of common interest and a

priority investment under the CESEC High-Level

Group).

light

remaining

challenges

(especially high electricity prices) Bulgaria

needs to take steps to support non-fossil

flexibility.

One turbine of the Chaira Hydro-

Pump Storage Power Plant was repaired in

2024, bringing back 170 MW of flexible

generation. Bulgaria is exploring solutions to

repair the other three turbines by 2026 in order

to restore the power plant’s full capacity of

800 MW. Under its RRP, Bulgaria will by 2026

deploy at least 350 MW of electricity storage

coupled with renewable energy production

(C4.I6) and at least 3000 MWh of grid-scale

battery storage systems (C4.I8). Bulgaria needs

to improve the regulatory and technical

framework for the participation of non-fossil

flexibility such as demand response and

storage in all wholesale markets. Bulgaria

registered 11 instances of negative prices on

the day-ahead market (

170

Bulgaria could do more to empower

consumers by removing barriers to

demand response, energy communities,

dynamic pricing and smart grids.

The roll-

out of smart meters is still below 10%.

Together with fully regulated household retail

tariffs, this hinders the introduction of dynamic

offers. A national framework for renewable and

citizen energy communities has existed since

2023. However, the fact that only three energy

communities are registered in Bulgaria

underlines the scope for further policy action to

remove barriers and improve the attractiveness

of these regulatory opportunities.

In 2023, electricity accounted for 27.4%

of Bulgaria’s final energy consumption

(FEC) (above the EU average of 22.9%)

and this share has slightly increased in

the last decade (

171

Electricity accounted for

51.7% and 31.9% of households’ and

industry’s FEC respectively (see also the

Effective Institutional Framework Annex). For

the transport sector, this share remained

negligible at 1.0%. Further electrification

across sectors will contribute to the cost-

effective decarbonisation of the economy and

improve access to affordable renewable

generation.

Renewables and long-term

contracts

Installed renewables capacity in Bulgaria grew

by 16% in 2024, the total renewable energy

capacity thus reached 7177 MW (see Graph X).

The deployment of solar slowed down

compared to previous years reaching a total

installed capacity of 3908 MW in 2024 (+1000

MW, a 34 % increase compared to 2023). In

(

170

) ACER, Occurrences of day-ahead negative prices in EU

bidding zones

–

2023.

(

171

)

The CAGR (compound annual growth rate) was 0.0%

between 2013 and 2023. The minimum/maximum

shares were 25.9% and 27.4% respectively.

kom (2025) 0202 - Ingen titel

contrast, wind installed capacity in Bulgaria

stagnated at 704 MW since 2019 (

172

Renewable

energy

sources

(RES)

accounted for 31% of Bulgaria’s

electricity generation in 2024 (the EU’s

overall RES share was 47% (

173

Bulgaria’s

2030 target for renewable energy in its NECP

is set at 34.96%, exceeding the ambition set by

the Renewable Energy Directive (33%).

Investment in grid capacity (including

distribution) and storage is needed in order to

facilitate the access of renewables to the grid.

Bulgaria took steps to better coordinate

permitting for renewable projects and to make

it simpler and faster, but there is still room for

improvement in administrative capacity,

streamlined procedures and digitalisation.

Bulgaria made progress in aligning national

permitting legislation on renewables with

Commission Recommendation EU 2024/1343.

Changes in the Renewable Energy Act and a

new ordinance (

174

) of the regulator accelerated

permit-granting and decreased administrative

burdens for renewable projects (including

energy storage). A presumption of overriding

public interest for renewable energy projects

does not exist in Bulgarian legislation. Bulgaria

has not outlined measures to increase the

visibility of renewable projects. There is limited

use of power purchase agreements for

renewable energy.

Graph A8.3:

Bulgaria's installed renewable

capacity (left) and electricity generation mix

(right)

“Other” includes renewable municipal waste, solid biofuels,

liquid biofuels, and biogas.

Source:

IRENA, Ember

Energy efficiency

Energy efficiency gains have improved in

Bulgaria, but there is still large untapped

potential.

2023,

primary

energy

consumption (PEC) decreased by 12.5% to

16.58 Mtoe. Final energy consumption (FEC)

decreased by 3.4% to 9.59 Mtoe. Compared

with 2022, FEC decreased in almost all main

sectors except for transport (where FEC

increased by 2.1%). In the industrial sector, FEC

decreased by 9.2%, in residential by 4.2% and

in services by 8%. Bulgaria’s 2030 target PEC

contribution of 13.19 Mtoe, as indicated in the

NECP, aligns with the EED recast Annex I

formula results: 13.71 Mtoe (Reference

Scenario) and 14.20 Mtoe (Updated Reference

Scenario). However, Bulgaria’s NECP 2030

target for FEC contribution of 8.82 Mtoe falls

short of the 8.42 Mtoe EED expectation.

Bulgaria should take measures to reach

its 2030 reduction target for energy

consumption of buildings by 251 ktoe that

was set in its latest long-term renovation

strategy (LTRS).

Between 2021 and 2030,

Bulgaria plans to renovate about 8% of the

total floor space of buildings and to save about

2.9 TWh and around 1.3 Mt of CO

emissions. However, FEC in the residential

sector increased by 6.15% between 2022 and

2023 (climate-corrected data). Heating and

cooling represent the highest share of FEC in

residential buildings (at about 67%). The

(

172

) Renewable capacity statistics 2025, IRENA

(

173

)

Yearly electricity data, Ember.

(

174

) Ordinance No. 6 of March 28, 2024, on the Connection

of Objects to the Electrical Networks by the Energy and

Water Regulatory Commission (KEVR).

kom (2025) 0202 - Ingen titel

climate-corrected FEC for space heating in the

residential sector has been on a slight

downward trend since 2020 (according to data

until 2022).

The limited nature of data on heating and

cooling prevents a full and proper

assessment

renewable

energy’s

potential in the sector.

Bulgaria has not

provided a comprehensive assessment on

heating and cooling that identifies the potential

of high-efficiency cogeneration and efficient

district heating and cooling (as required by the

recast EED). The share of heat pumps for the

supply of energy for heating and cooling is

reported at just 3%, compared with 37% for

heating boilers (including biomass boilers). The

residential electricity-to-gas price ratio has

decreased by 40% over the past five years,

making heating with heat pumps financially

attractive. In 2023 61% of households had an

air conditioner (

175

), but data on their use for

space heating are not available (

176

Bulgaria’s national financing framework

for mobilising investments in energy

efficiency is mostly composed of grants

but it does not leverage sufficient private

funding.

In 2024, Bulgaria continued

implementing

schemes

promoting

the

renovation of the public and commercial

building stock. It introduced a new scheme

targeting the private residential segment.

However, Bulgaria needs to leverage additional

private funding, in particular by supporting

energy services as a key market-enabler for

energy efficiency improvements. The building

and industry sectors have the greatest access

to funding programmes. Under its RRP, Bulgaria

executed reforms which enable Energy Service

Companies (ESCO) models (C4.R4); facilitate

investment in energy efficiency renovations in

residential buildings (C4.R2) and reduce the

administrative burden linked to renovations

(C4.R5). Under its RRP, Bulgaria will increase by

30% the energy efficiency of street lighting

systems (C4.I3) and building stocks in the

(

175

) Bulgarian National Statistical Institute, Availability of

Durables, 2023.

(

176

) Eurostat, Disaggregated final energy consumption in

households, data for 2022.

(i) residential; (ii) public; and (iii) manufacturing,

trade and services sectors (C4.I11).

Security of supply and

diversification

Bulgaria has not yet phased out Russian

fuels, but it has made efforts to

strengthen security of supply and

diversify its natural gas sources through

infrastructure investments.

Following the

expiry of the Ukraine-Russia agreement for

transit of gas, Bulgaria became the only entry

point for Russian pipeline gas into the EU. After

the completion of the Interconnector Greece-

Bulgaria (ICGB), Bulgaria took part in the

finalisation of the LNG terminal in

Alexandroupolis in 2024. Bulgaria should

accelerate the delayed realisation of the

project of common interest to expand the

capacity of the Chiren underground gas storage

to 1 bcm in view of its relevance for regional

security of supply. Bulgaria should support the

upgrade of the ICGB (phase II), which is a

priority project under REPowerEU and the

CESEC High-Level Group and which will allow

increased flows from TAP and LNG terminals in

Greece. The Bulgarian authorities and the gas

TSO should maximise the use of existing

infrastructure essential for the security of

supply of the south-east Europe region.

Bulgarian stakeholders should deliver on the

commitment in the CESEC High-Level Group to

harmonise different gas quality standards,

which are currently impeding the full usage of

the Trans-Balkan pipeline. Between August

2022 and November 2024, Bulgaria reduced

its gas demand by 14%, just below the 15%

voluntary target recommended by the

Council (

177

). Bulgaria terminated its temporary

exemption from EU sanctions on Russian oil

imports in March 2024

–

nine months before

its expiry.

Bulgaria’s Kozloduy nuclear power plant

operates two VVER-1000 reactors, which

(

177

)

Council Regulation (EU) 2022/1369

of 5 August 2022 on

coordinated demand-reduction measures for gas

kom (2025) 0202 - Ingen titel

contribute close to one third of the

national electricity generated.

To phase out

Russian nuclear fuel, the plant signed

diversification agreements with Westinghouse

and Framatome for alternative fuel supplies.

The new Westinghouse design fuel was loaded

in Unit 5 in May 2024. The first delivery of

Framatome fuel assemblies is expected in

November 2025. It is important for Bulgaria to

develop a national plan to fully phase out its

dependency on Russian nuclear fuel, as

foreseen by the REPowerEU Roadmap adopted

on 6 May 2025. The government has

announced that work will start on two new

reactors (AP1000) at the existing nuclear

installation. The first of these is planned for

commissioning after 2030.

Despite progress in renewables, Bulgaria’s

overall energy mix in 2023 remained

heavily reliant on fossil fuels.

Oil accounted

for 27.4% of gross inland consumption, coal

for 21.3% and natural gas for 12.4%

(

178

while renewables (and biofuels) contributed

14.4% (

179

). Nuclear accounted for 24.2%.

tariffs for CHP and district heating and (ii) the

systematically renewed order of the state for

the purchase of electricity from TPP "Maritsa

East II". Additionally, Bulgaria’s

2023 Effective

Carbon Rate (

183

) averaged EUR 65 per tonne of

CO₂, below the EU weighted mean of EUR

84.80 (

184

Fossil fuel subsidies

In 2023, environmentally harmful (

180

) fossil

fuel subsidies without a planned phase-out

before 2030 represented 0.82% (

181

) of

Bulgaria’s GDP

(

182

), above the EU weighted

average of 0.49%. Income/price support

accounted for 99% of this volume while the

remaining share were tax measures. Fossil fuel

subsidies without a planned phase-out before

2030 and which do not specifically address, in

a targeted way, energy poverty nor genuine

energy security concerns include (i) feed-in

(

178

) Electricity and heat are excluded in order to avoid

double-counting. The focus is on primary energy sources.

(

179

) Gross inland consumption (Eurostat).

(

180

) FFS that incentivises maintaining or increasing in the

availability of fossil fuels and/or use of fossil fuels.

(

181

) Ratio denominator is based on volumes cross-checked

with Bulgarian authorities.

(

182

) Ratio numerator is based on 2023 Gross Domestic

Product at market prices provided by Eurostat.

(

183

) The Effective Carbon Rates is the sum of carbon taxes,

ETS permit prices and fuel excise taxes, representing the

aggregate effective carbon rate paid on emissions.

(

184

) OECD (2024), Pricing Greenhouse Gas Emissions 2024

kom (2025) 0202 - Ingen titel

Table A8.1:

Retail energy price components for household and non-household consumers, 2024

Bulgaria

2021

Household consumer - Electricity retail price (EUR/KWh)

Energy & supply [%]

Network costs

Taxes and levies including VAT

VAT

Household consumer - Gas retail price

Energy & supply

Network costs

Taxes and levies including VAT

VAT

Non-household consumer - Electricity retail price

Energy & supply

Network costs

Taxes and levies excluding VAT

Non-household consumer - Gas retail price

Energy & supply

Network costs

Taxes and levies excluding VAT

Wholesale electrity price (EUR/MWh)

Dutch TTF (EUR/MWh)

0.1057

57.5%

25.8%

16.7%

0.0538

61.3%

26.6%

12.1%

16.7%

0.1188

72.4%

12.8%

-2.3%

0.0337

76.0%

5.9%

1.8%

211.8

n/a

2023

0.1165

46.9%

36.5%

16.7%

0.0792

67.0%

19.8%

13.1%

0.1366

71.1%

15.3%

-3.7%

0.0516

81.3%

5.8%

0.6%

104.1

n/a

2022

0.1120

49.1%

34.2%

16.7%

0.0969

80.7%

15.2%

4.1%

12.5%

0.1635

132.3%

11.3%

-72.3%

0.0886

93.0%

3.3%

-8.6%

261.2

n/a

2024

0.1201

56.1%

27.2%

16.7%

0.0634

59.1%

24.1%

16.7%

0.1184

77.8%

14.7%

-11.1%

0.0378

75.9%

6.6%

1.1%

102.3

n/a

2021

0.2314

36.6%

26.7%

36.7%

14.5%

0.0684

43.7%

22.5%

33.8%

15.5%

0.1242

43.0%

15.8%

30.4%

0.0328

66.2%

7.7%

12.5%

111.0

46.9

2022

0.2649

54.3%

25.3%

20.3%

13.4%

0.0948

61.0%

17.3%

21.7%

11.6%

0.1895

66.5%

10.7%

9.9%

0.0722

77.3%

3.8%

6.1%

233.2

123.1

2023

0.2877

55.6%

24.8%

19.6%

13.8%

0.1121

64.5%

17.1%

18.4%

10.2%

0.1971

63.0%

11.9%

11.2%

0.0672

77.3%

5.3%

7.3%

99.1

40.5

2024

0.2879

47.8%

27.2%

25.0%

14.6%

0.1128

53.9%

18.3%

27.8%

13.6%

0.1661

55.8%

15.5%

15.4%

0.0517

68.7%

7.1%

11.6%

84.7

34.4

2017

Gross Electricity Production (GWh)

Combustible Fuels

Nuclear

Hydro

Wind

Solar

Geothermal

Other Sources

Gross Electricity Production [%]

Combustible Fuels

Nuclear

Hydro

Wind

Solar

Geothermal

Other Sources

Net Imports of Electricity (GWh)

As a % of electricity available for final consumption

Electricity Interconnection [%]

Share of renewable energy consumption - by sector [%]

Electricity

Heating and cooling

Transport

Overall

45 613

23 633

15 545

3 493

1 504

1 403

51.8%

34.1%

7.7%

3.3%

3.1%

0.0%

0.1%

-5 480

-17.4%

7.1%

19.0%

29.9%

7.3%

18.7%

2018

46 838

22 606

16 125

5 423

1 318

1 343

48.3%

34.4%

11.6%

2.8%

2.9%

0.0%

-7 807

-24.9%

9.3%

22.4%

33.3%

8.1%

20.6%

2019

44 277

21 573

16 555

3 383

1 317

1 417

48.7%

37.4%

7.6%

3.0%

3.2%

0.0%

0.1%

-5 810

-18.7%

9.2%

23.5%

35.4%

7.9%

21.5%

2020

40 754

17 827

16 626

3 320

1 477

1 469

43.7%

40.8%

8.1%

3.6%

0.0%

0.1%

-3 408

-11.2%

11.3%

23.6%

37.2%

9.1%

23.3%

2021

47 568

23 079

16 487

5 067

1 434

1 467

48.5%

34.7%

10.7%

3.0%

3.1%

0.0%

0.1%

-8 778

-27.7%

14.7%

21.4%

30.0%

7.6%

19.4%

2022

50 499

26 583

16 462

3 833

1 499

2 094

52.6%

32.6%

7.6%

3.0%

4.1%

0.0%

0.1%

-12 195

-39.1%

23.5%

20.1%

31.6%

7.7%

19.0%

2023

40 256

15 831

16 163

3 130

1 584

3 521

39.3%

40.2%

7.8%

3.9%

8.7%

0.0%

0.1%

-3 333

-10.7%

21.2%

29.4%

34.9%

8.1%

22.5%

2024

16.8%

2020

Import Dependency [%]

of Solid fossil fuels

of Oil and petroleum products

of Natural Gas

Dependency from Russian Fossil Fuels [%]

of Natural Gas

of Crude Oil

of Hard Coal

38.2%

9.6%

97.5%

96.4%

75.2%

0.0%

84.5%

2021

36.2%

10.4%

97.2%

96.2%

79.8%

0.0%

87.9%

2022

37.1%

11.6%

106.1%

41.4%

0.0%

35.7%

2023

39.7%

5.2%

101.8%

99.7%

0.0%

2020

57.5%

35.8%

96.8%

83.6%

41.0%

25.7%

49.1%

2021

55.5%

37.2%

91.7%

83.6%

40.9%

25.2%

47.4%

2022

62.5%

45.9%

97.8%

97.6%

20.7%

18.4%

21.5%

2023

58.3%

40.8%

94.5%

90.0%

9.3%

3.0%

1.0%

2017

Gas Consumption (in bcm)

Gas Consumption year-on-year change [%]

Gas Imports - by type (in bcm)

Gas imports - pipeline

Gas imports - LNG

Gas Imports - by main source supplier [%]

Azerbaijan

Greece

United States

Russia

3.3

3.4%

3.3

0.0

0.0%

100.0%

2018

3.1

-5.5%

3.1

0.0

0.0%

0.1%

0.0%

99.9%

2019

2.9

-7.6%

2.9

0.0

0.0%

20.0%

0.0%

79.4%

2020

2.9

1.3%

2.9

0.0

0.7%

21.7%

0.0%

75.2%

2021

3.3

14.3%

3.3

0.0

8.2%

11.3%

0.0%

79.8%

2022

2.7

-18.3%

2.9

2.5

0.4

18.9%

26.3%

13.3%

41.4%

2023

2.5

-8.6%

2.5

2.3

0.2

35.2%

17.0%

1.7%

0.0%

2024

(i) For household consumers, consumption band is DC for electricity and D2 for gas. Taxes and levies are shown including VAT.

(ii) For non-household consumers, consumption band is ID for electricity and I4 for gas. Taxes and levies are shown excluding VAT

and recoverable charges, as these are typically recovered by businesses.

Source:

Eurostat

kom (2025) 0202 - Ingen titel

ANNEX 9: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT

Bulgaria faces major challenges in climate

adaptation such as the wide climate

insurance coverage gap and increased

vulnerability to extreme weather events such

as heatwaves and heavy rainfall.

Bulgaria has

a medium level of vulnerability to floods due to

the increase in intense and frequent extreme

weather events. These events have also had a

devastating effect on the economy, agriculture

and the environment. Overall, sustainable water

management remains a challenge in Bulgaria. The

rate of compliance with the Urban Wastewater

Treatment Directive was 31% in 2020. Bulgaria

also has the highest rate of water loss in the EU

and a deteriorating public water supply

infrastructure. It records an average of over 60%

of water loss, even reaching as much as 90% in

some regions.

events.

The European Climate Risk Assessment

finds that climate change is leading to increasing

river floods in the region, and a higher probability

of 10 for heavy rainfalls in the country (

188

). A

notable example is the impact of Storm Daniel in

2023, which caused severe pluvial and fluvial

floodings in Bulgaria.

Climate risks have a direct impact on

Bulgaria’s economy and society.

It is likely that

increasing climate stress will produce higher debt-

to-GDP projections in central-eastern Europe, as

well as higher pressure on the already changing

demography of the region (

189

). Between 1980 and

2023, Bulgaria suffered EUR 5.2 billion in

economic losses caused by weather and climate-

related extreme events, of which only 2% was

insured. Bulgaria has one of the lowest insurance

coverage rates against extreme events in the EU.

On the link between climate change and health,

Bulgaria also recorded around 156 deaths per

100 000 citizens due to extreme heat for the

period 2013-2022, a 5% increase on the previous

decade. The average exposure of older people to

heatwaves in Bulgaria has increased over the past

decade. Bulgaria also had the highest level of

exposure to wildfire smoke in central and eastern

Europe (

190

Greater national policy action on adaptation

and preparedness is needed in Bulgaria.

The

country has several national governance structures

in place, comprising a national adaptation plan, a

2030 adaptation strategy, a national expert

council on climate change, and a climate change

coordination council as well as a unified rescue

system and focal point for environmental data

collection and reporting. However, between 2021

and 2023 limited changes were made to the

national

governance structures supporting

adaptation to climate change.

The Commission’s

2023 assessment

of Bulgaria’s progress on

adaptation

identifies

several

areas

for

improvement. They

include

stepping up

coordination between the competent national

authorities, developing monitoring and modelling

tools and better reporting and planning at

subnational level. The Bulgarian recovery and

(

188

) EEA, 2024,

European Climate Risk Assessment.

p. 66.

(

189

) EEA, 2024,

European Climate Risk Assessment,

p. 77.

(

190

) EEA, 2024,

Economic losses from weather- and climate-

related extremes in Europe,

Link.

Climate adaptation and preparedness

Bulgaria is increasingly vulnerable to floods,

heatwaves and droughts.

A key concern is the

impact of heatwaves and droughts. Central-

eastern Europe has seen the highest annual

increase in vulnerability to droughts (

185

). The

average impact of droughts on ecosystems is

significantly higher in Bulgaria (7%) than it is in

other EU countries (average 4%), with only three

other European countries having a higher

percentage impact area (

186

). A peak was reached

in 2020 when 9.3% of ecosystems suffered from

severe drought. The impact of heatwaves and

droughts also extends to wildfires. Between 2006

and 2023, wildfires burned an annual average of

over 10 509 ha in Bulgaria. In 2024, there were

133 fires, significantly more than annual average

of 30 in previous years. Under a 3 °C climate

scenario, heatwaves that are currently a once-in-

50-year event may happen every 3-5 years in

Bulgaria (

187

Sustainable water management is also

important for Bulgaria, as the country faces

increases in heavy precipitation and flood

(

185

) EEA, 2024,

European Climate Risk Assessment.

(

186

) EEA, 2024, Drought impact on ecosystems in Europe,

Link.

(

187

) PESETA IV, Climate change impacts of heat and cold

extremes on humans, p. 1,

Link.

kom (2025) 0202 - Ingen titel

resilience plan has several reforms and

investments related to adaptation to climate

change. In particular, the national action strategy

contributing to the 2030 targets of the farm to

fork strategy promotes adaptation. Additionally,

the fund to promote the technological and

ecological transition of agriculture has adaptation

as the central objective. These measures aim to

address the challenges related to the increased

climate risks and, in particular, related to

sustainable water management and droughts.

Climate adaptation is increasingly tackled at

subnational levels, too.

Around 41.3% of the

population live in areas covered by the Covenant

of Mayors for climate & energy, with signatories in

10 of the 49 cities that made commitments on

adaptation. Two cities, Sofia and Burgas, have

made notable policy improvements on climate

adaptation, with an adaptation strategy for Sofia

and a vision to develop the Burgas municipality.

This is illustrated in the initiatives to develop

training courses and publicity material on climate

adaptation for both Burgas and Sofia, organised in

recent years. There is also an increase in projects

between Bulgarian municipalities and partners

from European countries to discuss innovative

measures to support climate mitigation and

adaptation. 13 of the 294 EU regions and local

authorities participating in the EU Mission on

Adaptation are in Bulgaria.

affects the water status and is one of the main

reasons for failure to meet the Water Framework

Directive objectives.

Moreover, Bulgaria’s marine

waters are not yet in a good environmental status.

It has not yet communicated its programme of

measures under the Marine Strategy Directive.

Bulgaria’s wastewater treatment is a cause

for concern.

The Urban Wastewater Treatment

Directive aims to protect human health and the

environment from the effects of untreated urban

waste water. Overall, in Bulgaria, the compliance

rate was 31% in 2020 which is the 4

lowest

value in the EU. According to data from the

Bulgarian Water Association and the World Bank,

Bulgaria ranks the highest in the EU on water

losses in the depreciated network, with an average

of over 60% losses, in places reaching as much as

90% (

191

). Monetary losses due to leaks reach

EUR 140 million. Measures to comply with the

requirements of the Directive are therefore

essential. This is particularly important as the

Directive has been revised to strengthen existing

treatment standards and bring in a new, additional

treatment for micropollutants in urban waste

water (

192

). To meet the various environmental

targets under the Water Framework Directive and

the Floods Directive, more investment is needed.

Bulgaria has a water investment gap of EUR 439

million per year (0.52% of gross domestic

product), EUR 239 million per year just for

wastewater measures (see Graph A9.1). Drinking

water measures require an additional EUR 31

million per year and the other aspects of the

Water Framework Directive around EUR 167

million per year over existing levels of financing.

Water resilience

In Bulgaria, issues with water resource

management persist. Large areas of Bulgaria

are subject to water stress, in particular due

to demand from energy, agriculture and for

the public water supply/tourism.

These sectors

are heavily dependent on water supply. The Water

Exploitation Index Plus (WEI+), which tracks water

use against renewable water resources, measured

1.2% in 2022 (EU average: 5.2%). Bulgaria

reported its second flood risk management plan in

January 2024 but has not yet reported its third

river basin management plan. Based on reporting

in the second river basin management plan, 46%

of all surface water bodies have a good ecological

status and 97% have a good chemical status. An

analysis of the second plan identified nutrients

leached from agriculture as a major source of

pressure on groundwater and surface water. This

Biodiversity and ecosystems

The state of nature and ecosystems is a

cause for concern in Bulgaria, reducing the

country’s climate resilience.

Bulgaria is one of

the most biologically diverse countries in the EU. It

hosts 92 habitat types and 209 species covered by

the Habitats Directive. In 2022, 34.9% of land in

Bulgaria was covered by the Natura 2000 network

(

191

) Ivanova, M., 2025,

Bulgarian solutions to major water

problems,

Kapital Insights,

Link.

(

192

) Directive (EU) 2024/3019, of 27 November 2024. The

deadline for transposition is 31 July 2027.

kom (2025) 0202 - Ingen titel

(EU average: 18.6%). Including both Natura 2000

and other nationally designated protected areas,

Bulgaria legally protects 41% of its land (EU-27

average: 26%) and 8.1% of marine areas (EU-27

average: 12%). The current level of biodiversity

financing is estimated at EUR 332 million per year

(in 2022 prices) in the 2021-2027 period. 62% of

this is direct financing for biodiversity and

ecosystems. To meet the environmental objectives

on protecting and restoring biodiversity and

ecosystems and other related horizontal

measures, Bulgaria has an estimated investment

gap of EUR 1.4 billion per year, corresponding to

1.7% of its GDP (see Graph A9.1).

Graph A9.1:

Investment needs and gaps in EUR

million, in 2022 constant prices

production in these sectors. Protecting and

restoring key ecosystems would help maintain the

long-term competitiveness of these sectors.

Graph A9.2:

Direct dependency(1) on ecosystem

services(2) of the gross value added generated by

economic sector in 2022

Agriculture

Forestry

Fishery and acquaculture

Mining and metals

Construction

Water utilities

Healthcare delivery

Aviation travel and tourism

Food beverages and tobacco

Supply chain and transport

Public services and others

Electricity

Chemical and materials industry

Electronics

Oil and gas

Real estate

Heat utilities

Automotive

Retail consumer goods and…

Information technology

Banking and capital markets

Insurance and asset…

Digital communications

High

Medium

Low

20%

40%

60%

80% 100%

2 000

1 800

1 600

1 400

1 200

1 000

800

600

400

200

Biodiversity

Baseline

Gap

Water

Source:

European Commission, DG Environment,

Environmental investment needs & gaps assessment

programme, 2025 update.

Nature degradation creates significant risks

to the economy and to competitiveness.

Several sectors such as agriculture, forestry,

fisheries, construction, mining and metals, water

utilities and healthcare (see Graph A9.2) are

particularly dependent on ecosystem services.

100% of the gross value generated by these

sectors is directly dependent on ecosystem

services. In addition, Bulgaria’s economy is heavily

dependent on ecosystem services in its supply

chain, with 30% of the gross value added highly

dependent. This is driven by a particularly high

degree of dependency in the mining and oil and

gas sectors. This means that failure to maintain

the capacity of ecosystems to deliver services

could entail significant costs or even stop

(1) Dependency based on the sector’s own operations,

excluding value chain operations within countries and across

international value chains. A high dependency indicates a high

potential exposure to nature-related shocks or deteriorating

trends, which means that the disruption of an ecosystem

service could cause production failure and severe financial

loss.

(2) Ecosystem services are the contributions of ecosystems to

the benefits that are used in economic and other human

activity, including provisioning services (e.g. biomass

provisioning or water supply), regulating and maintenance

services (e.g. soil quality regulation or pollination), and cultural

services (e.g. recreational activities).

Source:

Hirschbuehl et al., 2025,

The EU economy's

dependency on nature,

Link.

Sustainable agriculture and land use

Bulgaria’s carbon removals fall short of the

level of ambition needed to meet its 2030

target for land use, land-use change and

forestry (LULUCF).

Forests and grassland

management play a key role in Bulgaria in

removing carbon through land use. The main

contributions to carbon removals are from forest

management and afforestation/reforestation.

However, total net removals have fallen

kom (2025) 0202 - Ingen titel

from -16.3 million tonnes of CO

equivalent

(CO

eq) in 2005 to -9.5 in 2022. This indicates a

long-term deterioration of the situation, despite

net removals remaining broadly stable since 2016.

To meet its 2030 LULUCF target, an

additional -1.2 CO

eq removals are needed (

193

The latest available projections show a gap to

target of 1.4 million tonnes of CO

eq for

2030 (

194

). Therefore, additional measures are

needed to reach the 2030 target. The Bulgarian

national and energy climate plan details further

action in forest territories, afforestation of

abandoned agricultural lands, recovery of

wetlands and woodland belts. It is important for

Bulgaria to systematically provide information on

the timeframe for implementation, the source of

funding and especially the quantified impact of

the measures.

Bulgaria is transitioning to a sustainable

food system by implementing policies to

reduce the environmental impact of

agriculture.

The utilised agricultural area in

Bulgaria decreased from 5.12 million hectares in

2012 to 5.02 million hectares in 2022. In 2022,

6.2% of agricultural land had landscape features

such as woods and non-productive grasslands,

above the EU average of 5.6%. Bulgaria aims to

increase the area under organic farming, which is

currently very low (2.25%). To mitigate the

environmental impact of agriculture, Bulgaria’s

common agricultural policy strategic plan aims to

improve freshwater management through on-farm

investments in existing irrigation installations.

These investments should increase potential water

savings by 20% and reduce water use by 60% in

areas with water bodies in less than good

condition. Standards for good agricultural and

environmental conditions set more demanding

basic requirements for farmers that aim to protect

the soil, preserve soil potential, reduce water

pollution and increase biodiversity.

(

193

) National LULUCF targets of the Member States in line with

Regulation (EU) 2023/839.

(

194

) Climate Action Progress Report 2024 COM/2024/498.

kom (2025) 0202 - Ingen titel

Table A9.1:

Key indicators for progress on climate adaptation, preparedness and environment

Climate adaptation and preparedness:

Drought impact on ecosystems

[area impacted by drought as % of total]

Forest fires burned area

(1)

[ha, annual average 2006-2023]

Economic losses from extreme events

[EUR million at constant 2022 prices]

Insurance protection gap

(2)

[composite score between 0 and 4]

Heat-related mortality

(3)

[number of deaths per 100 000 inhabitants in 2013-

2022]

Sub-national climate adaptation action

[% of population covered by the EU Covenant of Mayors

for Climate & Energy]

Water resilience:

Water Exploitation Index Plus, WEI+

(4)

[total water consumption as % of renewable freshwater

resources]

Water consumption

[million m

]

Ecological/quantitative status of water bodies

[% of water bodies failing to achieve good status]

Surface water bodies

Groundwater bodies

Biodiversity and ecosystems:

Conservation status of habitats

(6)

[% of habitats having a good conservation status]

Common farmland bird index

2000=100

Protected areas

[% of terrestrial protected areas]

Sustainable agriculture and land use:

Bioeconomy's added value

(7)

[EUR million]

Landscape features

[% of agricultural land covered with landscape features]

Food waste

[kg per capita]

Area under organic farming

[% of total UAA]

Nitrogen balance

[kg of nitrogen per ha of UAA]

Nitrates in groundwater

(8)

[mgNO

/l]

Net greenhouse gas removals from LULUCF

[Kt CO

-eq]

2.6

61.8

29.8

(9)

(5)

Bulgaria

2018

0.02

10 509

156

2019

0.13

10 509

156

2020

9.33

10 509

156

2021

0.81

10 509

156

2022

3.56

10 509

1.75

156

2023

2.49

10 509

1.63

EU-27

2018

6.77

2021

2.76

24 142

62 981

Bulgaria

2018

0.8

2019

1.0

2020

1.0

2021

0.9

2022

1.2

2023

EU-27

2018

4.5

2021

4.5

976

970

915

976

1 055

Bulgaria

EU-27

59%

93%

2018

12.2

2019

2020

2021

2022

2023

2018

14.7

72.2

2021

74.4

Bulgaria

2018

4 001

2019

4 225

2020

4 471

2021

5 335

2022

2023

EU-27

2018

634 378

2021

716 124

2.3

28.8

29.5

9 586 -

108

2.3

54.2

30.5

9 605 -

103

1.7

35.0

30.5

9 579 -

2.2

38.7

9 540

7.99

256 077 -

240 984

9 872 -

(1) The data show the average for the timespan 2006-2023 based on EFFIS - European Forest Fire Information System.

(2) Scale: 0 (no protection gap)

–

4 (very high gap). EIOPA, 2024, Dashboard on insurance protection gap for natural catastrophes.

(3) van Daalen, K. R. et al., 2024, The 2024 Europe report of the Lancet Countdown on health and climate change: unprecedented

warming demands unprecedented action, The Lancet Public Health.

(4) This indicator measures total water consumption as a percentage of the renewable freshwater resources available for a given

territory and period. Values above 20% are generally considered to be a sign of water scarcity, while values equal or greater than

40% indicate situations of severe water scarcity.

(5) European Commission, 2024, 7th Implementation Report from the Commission to the Council and the European Parliament on

the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third River Basin

Management Plans and Second Flood Risk Management Plans).

(6) For this indicator, the EU average includes figures for the UK under the previous configuration, EU-28.

(7) European Commission, 2023, EU Bioeconomy Monitoring System dashboards.

(8) Nitrates can persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources

(mainly agriculture). The EU drinking water standard sets a limit of 50 mg NO

/L to avoid threats to human health.

(9) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2024

greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839

–

Annex IIa.

Source:

Eurostat, EEA.

kom (2025) 0202 - Ingen titel

FAIRNESS

ANNEX 10: LABOUR MARKET

Bulgaria’s labour market is marked by

growing employment

–

surpassing pre-

pandemic levels

–

and strong wage

increases.

However, the country continues to

struggle with structural challenges that negatively

impact its competitiveness and undermine its

economic growth potential. They include: i) adverse

demographic developments; ii) migration of talent;

iii) skills shortages in the face of the twin green

and digital transition; iv) underrepresentation of

some groups due to low capacity of active labour

market policies, particularly Roma, persons with

disabilities, young people and people with low

levels of education; and v) stark regional

disparities. As Bulgaria is progressing well on its

2030 employment rate target of 79%, it is crucial

that the country fosters a resilient and more

inclusive labour market and supports economic

growth by means of i) expanding the workforce by

activating underrepresented groups; ii) addressing

skills and labour shortages; iii) preparing the

labour force for the twin transition; and iv)

increasing productivity and job quality.

Bulgaria’s labour market performs strongly

but is characterised by a shrinking

workforce.

The employment and activity rates

rose to historically high levels, reaching 76.8% and

80.1% in 2024, respectively against EU averages

of 75.8% and 80.4%, with Bulgaria closing in on

its 2030 employment target of 79% (see Social

Scoreboard in Annex 13). However, the total

number of people in employment follows a

negative trend mainly due to adverse demographic

change, with a decline of 3% in the working-age

population between 2019 and 2023. The

unemployment rate remained low (4.2% in 2024),

below the EU average (5.9%), following a

continuous downward trend in recent years. The

labour market slack (

195

) continues to decline (from

6.9% in Q3-2023 to 6% in Q3-2024), remaining

well below the EU average of 10.1% in Q3-2024.

This decrease was mainly due to a lower number

of unemployed and fewer people available to work

(but not seeking). The job vacancy rate has been

consistently low for the last 10 years; it stood at

0.8% in 2024, 1.6 percentage points (pps) below

the EU average and is one of the lowest in the EU.

(

195

) Labour market slack refers to all unmet needs for

employment, namely representing the extent to which labour

supply exceeds labour demand in the short run.

Employers report significant labour needs in

the short and long term, but overall labour

demand has decreased.

In 2024, a

comprehensive annual employers’ survey

(

196

)

suggested that the demand for workers had

remained high, with an estimated total need of

over 260 000 additional workers (9.3% of the

workforce), only 2.6% less than what was reported

in 2023. However, the number of published job

vacancies decreased in 2023 and 2024.

Nonetheless, the share of employers expecting

labour shortages to limit their production was

above the EU average in Q4-2024, standing at

43.8% for construction, 39.9% for industry and

29.4% for the service sector (

197

). Growing deficits

have emerged for certain occupations, including

some in sectors with low pay and difficult working

conditions The most requested occupations were

accounting clerks, office professionals, researchers

and engineers, teachers, nurses and personal

service workers (

198

). Skills shortages reported by

the Bulgarian employers relate to structural

challenges with the education system, and

deficiencies in upskilling and reskilling the labour

force.

The strong overall performance of the labour

market is accompanied by pronounced

regional disparities.

The Severozapaden region

had the lowest employment rate with 67.2% in

2023 (20-64 age group), while the Yugozapaden

region (thanks to the strong economy of the

capital city Sofia) was the best performer with

80.5%, surpassing the 2030 national target (79%)

(see Graph A10.1). In Q4 2024, the average

monthly wages varied from EUR 968 in the

Severen tsentralen region (followed closely by the

Severozapaden region) to EUR 1 533 in the

Yugozapaden region (

199

). Similarly, in terms of

activity rates, the Severozapaden region is the

worst performer, with 72.9% and the Yugozapaden

region reports the highest rate at 83.3%. Over

recent years, regional disparities in terms of

employment levels and job opportunities, as well

(

196

)

https://www.az.government.bg/pages/prouchvane-

potrebnosti-2024/

(

197

) ECFIN European Business and Consumer Surveys.

(

198

)

EURES - Countries and occupations | CEDEFOP.

Data from

January to September 2024.

(

199

) Average monthly wages per region,

National Statistical

Institute data.

kom (2025) 0202 - Ingen titel

as wage levels show little signs of improvement. In

addition to the gap in the labour market

performance in the Severozapaden region, some

municipalities in the best performing regions such

as Yugozapaden (highly influenced by the capital

Sofia) have unemployment rates that are three

times the national average. This is indicative of the

considerable divide in the labour market’s

performance between big cities and smaller towns

and rural areas.

Graph A10.1:

Employment per region, 2008-2024

market shares at rapid pace. Due to the stark

regional disparities, the minimum wage is around

60% of the average salary in the Severozapaden

region and below 40% of the average salary in the

Yugozapaden region. Despite hourly labour costs

recording double-digit growth in 2022 and 2023,

Bulgaria continues to be one of the Member States

with the lowest labour costs, more than three

times lower than the EU average. Labour

productivity (GDP per hour worked) has been

growing in the last 10 years (except for 2023),

averaging 2.4% growth over this period and it

improved further in 2024 (

201

). However, the

nominal labour productivity remains among the

lowest in the EU.

The relatively high employment rate is not

evenly distributed and vulnerable groups

experience

considerably

higher

unemployment rates.

Young people, persons

with disabilities, those with lower educational

attainment and the Roma face difficulties

integrating into the labour market. While the share

of young people (15-29) neither in employment

nor in education and training (NEET) is declining in

line with the overall trend in the EU, it remained

high at 12.7% in 2024 (1.7 pps above the EU

average). However, the decline is not equal for all

groups. 52% of young persons with disabilities

were NEET in 2022 (

202

). The disability employment

gap has also been consistently one of the highest

in the EU (except for 2021), standing at 35.4 pps

in 2024 (vs EU: 24 pps), a 5.9 pps increase from

2022 (see Graph A10.2). So far, Bulgaria has not

set an employment target for persons with

disabilities. Employment outcomes are closely tied

to educational attainment. The employment rate

for people with at most lower-secondary

education, at 48.5%, is around 42 pps lower than

for those with tertiary education (compared to a

27.8 percentage point gap in the EU on average)

(see Graph A10.2). The Roma are facing

substantial challenges in gaining employment with

only 47% in employment while the share of Roma

women in employment is two times lower than for

Roma men (31% vs 63%) (

203

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

BG31 Severozapaden

BG34 Yugoiztochen

2030 employment rate target

BG32 Severen tsentralen

BG41 Yugozapaden

BG33 Severoiztochen

BG42 Yuzhen tsentralen

% of population 20-64

Source:

Eurostat, LFS [lfst_r_lfe2emprt]

While remaining among the lowest in the EU,

wages and labour costs continue to grow,

outpacing inflation and labour productivity

growth.

Despite the disinflation (from 13% in

2022 to 8.6% in 2023 and 2.6% in 2024), wages

kept growing rapidly in 2023 and 2024, driven by

increases in public sector wages and the minimum

wage. In 2023, the government adopted a

mechanism setting the statutory minimum wage

at 50% of the average gross wage for the past

12 months. This led to a sharp increase of 19.6%

in 2024 (setting the minimum wage at EUR 551)

and an increase of 15.4% for 2025, outpacing

inflation. Real wages grew by 6.4% in 2024 and

are expected to increase by 8.4% in 2025, after

moderate growth, but which is still higher than the

EU average growth rates in 2022 and 2023 (1.4%

and 4.7%, respectively) (

200

). The strong increases

in wages in recent years have pushed up unit

labour costs more than in other EU Member

States. However, unit labour costs remain at a very

low level and Bulgaria continues to gain export

(

200

)Based on the European Commission Autumn 2024 economic

forecast.

(

201

)

See National Statistical Institute’s

annual

data.

(

202

)

European comparative data on persons with disabilities -

Publications Office of the EU

(

203

) FRA Roma Survey 2021.

kom (2025) 0202 - Ingen titel

While women’s participation in the labour

market remains consistently above the EU

average

overall,

challenges

remain,

especially concerning the gap in wages and

the share of women in management

positions.

In 2024, women’s

participation in the

labour market stood at 73.1% compared to an EU

average of 70.8%. The gender pay gap has been

fluctuating showing no an upward trend in recent

years, standing at 13.5% in 2023 vs an EU

average of 12%. The share of women in senior

management positions is improving, but it stood at

only 18.3% compared to an EU average of 33.8%.

Contributing factors include workers having less

flexibility to decide on their working time

compared to the EU average, limited availability of

childcare facilities (particularly in densely

populated cities) (

204

), stereotypes about women’s

family responsibilities and limitations as regards

working hours. The limited capacity and quality of

childcare facilities is particularly worrying as it is

not showing signs of improvement contrary to the

overall EU trend. With participation of children

under the age of 3 in formal childcare standing at

21.2% in 2024, Bulgaria is considerably below the

EU average (39.2%). All these factors result in

women finding more job opportunities in

professions with lower pay (e.g. social workers,

waitresses, hotel maids or cashiers). Bulgaria

consistently reports the lowest share of people

working part-time or on temporary contracts in the

EU (1.5% vs an EU average of 17.2% in 2024). At

the same time, the share of involuntary part-time

employment in Bulgaria was more than twice the

EU average in 2024 (38.7% vs 18.2%), suggesting

that even the modest use of part-time contracts in

many

cases is not to the worker’s benefit.

Graph A10.2:

Employment low-skilled and

disability employment gap

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Share of low-skilled in employment EU-27

Share of low-skilled in employmnet BG

Disability employment gap EU-27

Disability employment gap BG

% of ISCED 0-2 age 20-64

Source:

Eurostat, LFS [lfsa_ergaed, tepsr_sp200]

Demographic decline is limiting Bulgaria’s

competitiveness and growth potential.

Bulgaria lost 19.1% of its working-age population

between 2011 and 2021, mainly due to migration

outflows (

205

) and ageing, with the negative trend

set to continue. Bulgaria had one of the highest

shares of people aged 65 or older in the EU in

2024 (23.8% vs 21.6% EU average) and the share

of children (0-14 years) was below the EU average

(14.1% vs 14.6%). In the short term, despite a

slowdown of the negative growth (

206

), the

population is expected to decline by additional

3.4% by 2027 (

207

). Long-term projections suggest

a further decrease of 21% from by 2050 (

208

Despite subsiding, outward migration of workers

and loss of talent continue to be an issue, with

differences in living standards in the EU being a

major driver. Even with its relatively high growth

rate, the average wage in Bulgaria reached only

36% of the EU average in 2023, while the labour

productivity was 56.3% (

209

) and the GDP per

capita was 64% of the EU average. The disparities

in wage levels between Bulgaria and other

Member States appear to be more pronounced for

(

205

) A total of 344 000 people emigrated during that period,

which was the cause of 40.7% of the decline in the total

population (see the

press release

and the

Statistical

reference book for the 2021 census,

National Statistical

Institute, Sofia 2023).

(

206

) 2023 and 2024, were the years with the smallest negative

growth in the last decade: -0.54% and -0.03%, respectively.

(

207

) Analytical Report on Labour Market Imbalances, the

Employment Agency by Metric Analytics (2023).

(

204

)

Education in the Republic of Bulgaria,

National Statistical

Institute, Sofia, 2024.

(

208

)

See World Health Organisation’s projection at

https://data.who.int/countries/100.

(

209

) Nominal labour productivity per hour worked.

Disability gap pps

kom (2025) 0202 - Ingen titel

low-skilled jobs (

210

). Nevertheless, Bulgarian

citizens leaving the country are often highly

educated (

211

), suggesting that Bulgaria is also

losing some of its most skilled workers. Because of

this demographic situation, activating and

integrating underrepresented groups in the labour

market is critical for Bulgaria’s competitiveness

and economic growth, as the shrinking labour

force poses long-term challenges. Some recent

positive developments in relation to migration (

212

)

suggest that efforts to attract workers to the

country could be successful thanks to growing

wages and might help address the potential labour

shortages to some extent.

The public employment service (PES) has

implemented activation measures, but

further efforts will be needed to boost its

capacity and further expand the labour force.

The investments in and capacity to provide active

labour market policies (ALMPs) in Bulgaria is

among the lowest in the EU, negatively impacting

vulnerable groups. The human resources

development programme financed by European

Social Fund Plus (ESF+) has set aside a dedicated

budget of EUR 315 million to integrate

unemployed or inactive young people into the

labour market and enable them to develop their

skills. Key strategic operations targeted at young

people, unemployed people and inactive people are

already being implemented. A data exchange

mechanism to register inactive people is being

prepared, with expectations that it would enable

the PES to identify, target and support them as

well as include them in the labour market. Further

development of the network of Roma mediators

and the digitalisation of the PES (with support

from the Recovery and Resilience Facility, the ESF+

and the Technical Support Instrument) could have

more impact on the ground. ALMPs in Bulgaria still

allocate substantial resources to subsidised

employment at the expense of training, while data

show that training measures are the most

(

210

)

Statistics | Eurostat.

Largest differences in pay are visible for

elementary workers and for service and sales. Skilled labour

is also paid much lower, but the gap is smaller

(

211

)

Garrote Sánchez, Daniel, Janis Kreuder, Mauro Testaverde,

‘Migration in Bulgaria: Current Challenges and Opportunities’,

Social Protection & Jobs, Discussion paper No

2109,

World

Bank Group, Washington, December 2021.

(

212

) Data from the National Statistical Institute show a reverse in

the overall negative migration flow since 2020, with positive

net migration both for EU and non-EU citizens (see

here

and

here).

effective and should play a more prominent role in

the mix of ALMPs. In addition to targeted ALMPs

along with upskilling and reskilling, fostering legal

migration and attracting talent, particularly from

non-EU countries, may be increasingly needed to

alleviate labour and skills shortages in key sectors

and bolster Bulgaria’s competitiveness.

The workforce faces challenges to adapting

to the green and digital transitions, with a

growing need for skilled workers in emerging

sectors.

In 2024,

employment in the country’s

energy-intensive industries represented 3% of

total employment or more than 98 000 (3.5% in

the EU), with 15 000 employees to be directly

impacted by the green transition in the most

affected regions of Kyustendil, Pernik and Stara

Zagora. Jobs in the green economy have expanded

rapidly

–

employment in the environmental goods

and services sector grew by 34.7% between 2016

and 2022 (one of the largest increases, but

starting from a low base), reaching 2.5% of total

employment (EU: 3.3%) in 2022. The greenhouse

gas emission intensity of Bulgaria’s workforce has

improved, decreasing from 17.6 tonnes per worker

in 2011 to 12.3 in 2023, in line with the EU

average, suggesting some progress has been

made in the green transition. As to the digital

transition, the information and communication

technology (ICT) sector remains underdeveloped,

with ICT specialists accounting for 4.3% of total

employment in 2023, compared to 4.8% in the EU,

due to, among other things, a low level of

enrolment in higher education programmes

preparing ICT specialists, despite an increase.

Nevertheless, the number of ICT specialists grew

by 13.2% between 2022 and 2023, compared to

an EU average growth of 4.3%. Also, Bulgaria had

the highest share of female ICT specialists (29.1%

vs EU 19.4%). Broader digital skills among the

working population also lag behind, with 46.4% of

workers (aged 25-64) having at least basic digital

skills (EU average 64.74%), while just 35.5% of

the general population meets this threshold (see

Annex 12). Only 9.1% of Bulgarian businesses with

10 or more employees provide ICT training,

against an EU average of 22.4%. Moreover, only

one third of people in Bulgaria believe they have

the necessary skills to contribute to the green

transition (see Annex 12) underscoring the need to

further strengthen people's upskilling and

reskilling.

While wages have increased, a high in-work

poverty rate, as well as low levels of adult

kom (2025) 0202 - Ingen titel

learning and occupational safety negatively

impact on job quality.

Despite the rapid growth

in 2023 and 2024 and a projected considerable

increase in 2025, real wage levels remain low

compared to other EU Member States and Bulgaria

had one of the highest rates of in-work poverty in

the EU in 2024 at 11.8%, considerably above the

EU average of 8.2%. The situation is much worse

for those working part-time, where the share of

those at risk of poverty reached 30.1% compared

to an EU average of 12.6% in 2023. Despite some

fluctuations, the overall in-work poverty rate has

been steadily rising over time. In addition, people

in employment often have limited access to

training courses, with only 28% being involved in

education or training in 2022 (among the lowest in

the EU), compared to an EU average of 53.9%. In

addition, with one of the highest incidence rates of

fatal accidents in the EU in 2022 at 3.33 per

100 000 employed (twice the EU average of 1.66),

Bulgaria has made little progress in improving

safety at work in the period 2018-2022. These

characteristics of the labour market, coupled with

the poor outcomes of the education system,

undermine the potential to create quality jobs,

reduce the attractiveness of employment in

general, and negatively affect the quality and

availability of labour, therefore jeopardising

Bulgaria’s competitiveness and potential for

economic growth.

kom (2025) 0202 - Ingen titel

ANNEX 11: SOCIAL POLICIES

Social conditions are improving in Bulgaria

as overall poverty has decreased. At the

same time the country continues to face

significant challenges related to very high

poverty and social exclusion,

particularly

among some groups, notably children. Income

inequalities remain high, partially due to the low

redistributive impact of the tax and benefit

system. Addressing these challenges will

contribute

inclusive

growth

and

competitiveness. The acute demographic decline

raises concerns for the adequacy and

sustainability of social security, specifically

pensions, and the care system. The limited

capacity of the social protection system and

uneven access to quality services also pose risks

for Bulgaria’s sustainable and inclusive growth.

Despite progress, poverty and social

exclusion risks continue to be widespread.

The rate of people at risk of poverty or social

exclusion (AROPE) has been declining gradually

since 2015, with an annual increase of

0.3 percentage points (pps) in 2023 and a total of

13.0 pps over this period. This is mainly driven by

a reduction in the severe material and social

deprivation rate, which is 20.2 pps lower than in

2015. Conversely, the at-risk-of-poverty rate

(AROP) has largely stagnated, only decreasing by

0.3 pps since 2015 (see Graph A11.1). These

positive developments can be attributed to

economic growth above the EU average (2.8% vs

1.0% in the EU in 2024) as well as a longer-term

convergence process. However, poverty rates

remain among the highest in the EU, with the

AROPE rate at 30.3% in 2024 (EU: 21.0%), severe

material and social deprivation at 16.6% (EU:

6.4%), and the AROP rate at 21.7% (EU: 16.2%).

Persistent poverty risks are driven by a

combination of factors, including unequal

economic opportunities and limited access to

quality education, healthcare and social services,

especially in rural areas and for disadvantaged

groups, notably Roma. The number of people in

AROPE decreased by 371 000 since 2019

(reaching around 2 million in 2024). At the current

pace, Bulgaria appears to be on track to reach the

2030 reduction target of 787 000 compared to

2019. Still, continuous and sustained support is

important to reach the national poverty reduction

target by 2030.

Graph A11.1:

Components of AROPE, 2015-2024

2021

2015

2016

2017

2018

2019

2020

2022

2023

2024

At-risk-of-poverty or social exclusion rate

At-risk-of-poverty rate

Severe material and social deprivation

People living in low work intensity households

% of total population

Source:

Eurostat, EU-SILC [ilc_peps01n,ilc_li02, ilc_mdsd11,

ilc_lvhl11n]

The risk of experiencing poverty or social

exclusion is affected by several factors,

including age, place of residence, disability

status and ethnicity.

In 2024, people living in

rural areas were almost twice as likely to face

poverty or social exclusion risks (at 40.8%) than

those residing in cities (22.1%). The AROPE rate

was also very high for older people (36.6% vs the

EU average of 19.4%), and Roma people

(78.3%) (

213

), and was one of the highest in the EU

for persons with disabilities (43.8%). In-work

poverty affected 11.8% of the workforce in 2024

(up from 11.4%) vs 8.2% in the EU, with large

differences across economic sectors and regions.

Approximately EUR 632 million from the European

Social Fund Plus (ESF+) is allocated for social

inclusion and a further EUR 180 million for

material aid to the most vulnerable. More

sustainable, holistic and multisectoral initiatives

could help effectively address the challenges

faced by children, persons with disabilities, Roma

and the rural population.

The risk of poverty or social exclusion among

children remains among the highest in the

EU.

The AROPE rate for children has increased to

35.1% in 2024 (EU: 24.2%), pointing to a

persistently critical situation. Children whose

parents have low levels of education are more

(

213

) Bulgaria National Statistics Institute.

kom (2025) 0202 - Ingen titel

likely to experience poverty: more than 4 in 5

children from households with a lower educational

attainment are affected, compared to around 1 in

8 from households with a high level of education.

In 2024, the proportion of materially deprived

children was 18.5% among the Bulgarian ethnic

group and 77.7% among Roma (

214

). By 2030,

Bulgaria aims to reduce the number of children at

risk of poverty or social exclusion by at least

196 750 compared to the 2019 level. In 2024,

40 000 fewer children were AROPE compared to

the baseline of 434 000, highlighting the need for

more support. To mitigate the impact of poverty

on children, Bulgaria is implementing the European

Child Guarantee (ECG) according to its national

action plan and targeted two-year operational

plans. The 2024 ECG progress report shows

considerable progress, but it also underlines

outstanding challenges in terms of proper nutrition

and healthy diet, affordable housing and the

accessibility of early childhood education and care.

The ECG’s implementation is supported by EU

cohesion policy funds and the Recovery and

Resilience Facility (RRF), including through the

construction

kindergartens,

educational

assistance, food and material support, and

integrated services provision.

Despite improvements since 2018, income

inequality remained high.

The income of the

richest 20% of the population was nearly 7 times

that of the poorest 20% in 2024. The sum of the

income shares of the first and second income

quintiles (S40) was particularly low (17.5%,

4.3 pps below the EU average). It has increased

gradually but is still far from the pre-2008 value

(20.6%). The income in the first and second decile

groups (the poorest) increased by 50-60%

between 2020 and 2023, while in the eighth and

ninth decile groups, income increased by only 30-

40%. Moreover, income inequality is influenced by

the inequality of opportunities in early childhood,

whereby aspects such

as parents’ education have

a disproportionate effect on income prospects

later in life (

215

). According to a recent European

Commission study (

216

) on inequality trends post-

2007, the inequality-reducing effect of taxes (see

Annex 2) and social transfers on income inequality

(S80/S20) is one of the lowest in the EU (27% vs

48% for the EU).

Graph A11.2:

Components of energy poverty 2015-

2024

Inability to keep home adequately

warm

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Arrears on utility bills

Inability to keep home adequately warm (EU27)

Arrears on utility bills (EU27)

Inability to keep home adequately warm (BG)

Arrears on utility bills (BG)

% of population

Source:

Eurostat, [ilc_mdes01, ilc_mdes07]

(

214

) Self-assessment in survey of applicable ethnic group

(Bulgarian, Turkish, Roma, etc.), National Statistics Institute.

(

215

) Inequality of opportunity in Bulgaria: Policy Note (2024).

World Bank. Available

https://openknowledge.worldbank.org/entities/publication/4

6e9792b-7 879-4354-b1d8-faa7d44986b8.

Energy and transport poverty, coupled with

environmental inequalities, pose significant

challenges to the fair green transition.

The

share of the population unable to keep their

homes adequately warm decreased between 2016

and 2024 (by 20.2 pps, to 19%; see Graph A11.2).

Nevertheless, it remains significantly higher than

the EU average (9.2%) and particularly high for

people at risk of poverty, almost double the

national average, at 37.2%. Arrears on utility bills

are also more pronounced than in most other

Member States with 17.6% of households facing

arrears on utility bills in 2024, a sizeable decrease

of 16.4 pps compared to the peak of 34% in 2013,

but still more than double the EU average of 6.9%.

To address this, Bulgaria has implemented

targeted

heating

allowances

benefiting

approximately 340 000 households annually.

Long-term strategies include the renovation of

multi-family residential buildings to upgrade them

to energy class C. The updated national energy

and climate plan includes plans for a knowledge

centre on energy poverty but does not include

specific targets or timelines. Bulgaria has adopted

a definition of energy poverty and energy

vulnerability (as part of its recovery and resilience

plan (RRP)), but the support mechanisms are still

under development and more targeted efforts will

be necessary, especially in light of Bulgaria’s

commitment to liberalising the electricity market.

In the area of transportation, the share of the

(

216

)

Economic Inequalities in the EU

(2024). European

Commission:

960863c4-b2b3-45ac-a79b-

e693d5cec7da_en.

kom (2025) 0202 - Ingen titel

population who could not afford a car was 10.5%

in 2024 (vs EU: 5.6%), even more pronounced

(22.9%) for people in AROP. Reliance on private

cars for inland transport rose to 86.9% in 2022

(80.6% in 2011), exceeding the EU average of

83.4%. In the same period, the share of trains,

motor coaches, and trolleybuses for inland

transport declined from 19.4% to 13.1%. Overall,

Bulgaria’s transportation infrastructure and public

transportation system may not be adequately

meeting the needs of its population, especially

lower income households. On environmental

inequalities, the consumption footprint for 20% of

the population with the highest income was 2.3

times higher than the footprint of the poorest 20%

in 2022 (EU: 1.9).

Despite recent improvements, the social

protection system still has adequacy and

coverage gaps.

Expenditure on social protection

benefits is among the lowest in the EU (18.3% vs

26.8% of GDP in 2023), especially on social

assistance, family benefits and unemployment

benefits. According to the benchmarking

framework on minimum income, Bulgaria

performs much worse than the EU average in

terms of adequacy (19.1% of the poverty

threshold vs 56.3% for the EU in 2023), with an

observable decrease in the longer term. Moreover,

only 25.1% of the unemployed (unemployed for

less than 12 months) received unemployment

benefits in 2024 (EU: 36.6%). The limited capacity

of the system to alleviate poverty suggest a

potential to increase the efficiency, coverage and

effectiveness. In 2024, the impact of social

transfers (excluding pensions) on poverty reduction

was still limited at 27.7%, significantly less than

the EU average of 34.4%. Some workers in non-

standard forms of employment (including certain

seasonal workers) and the self-employed in

general have little social protection coverage and

face substantially higher poverty and deprivation

rates. The social protection system has been

recently strengthened through the inclusion of

automatic indexation mechanisms and simplified

eligibility criteria, which are expected to result in

better adequacy and coverage. The minimum

income reform (a deliverable under the RRP), in

force since June 2023, has improved the social

assistance system allowing for better adequacy,

and larger coverage of a variety of support

schemes. The take-up of disability-related benefits

has increased, and their adequacy has been

improved. Yet, there is scope for further measures

to strengthen access to social protection, in line

with the 2019 Council recommendations (

217

Demographic trends pose a significant

challenge for the future adequacy of the

pension system.

In 2024, the aggregate pension

replacement ratio (excluding other social benefits),

defined as the gross median individual pension

income (for the 65-74 age group) relative to gross

median individual earnings from work (for those

aged 50-59), decreased annually from 0.46 to

0.44 (below the EU average of 0.61). Since 2022

the government has focused its efforts on

improving the adequacy of the pension system

with the latest indexation of 11% taking place in

July 2024. The age cohorts above 65 are expected

to account for a greater proportion of the overall

population by 2070, rising to 31% compared to

22% in 2022 (

218

). Retaining older people in the

labour market and incentivising them to prolong

their working lives is key to achieving a

sustainable job market and a balanced social

system in the longer term. Yet demographic trends

will put financial pressure on the pension system,

the National Insurance Institute calculated that the

expenditure for pensions would peak in

2026/2027 at 11.5% of GDP, and that it would

then stabilise at around 10%, but this would

require large transfers from the central

budget (

219

). To compensate for the increased

costs and to guarantee the long-term financial

sustainability, a number of recommendations were

made by the National Insurance Institute, such as

increasing pension contributions, weighing in the

automatic indexation mechanism, and limiting the

impact of the special categories of workers.

Amid a rapidly ageing population, access to

long-term care services for older people and

persons with disabilities remains limited.

2022, spending on long-term care (LTC) in

Bulgaria was among the lowest in the EU (0.5% of

GDP vs 1.7% in the EU). This is reflected in the

very low share of people aged 65+ who receive

public home care or residential care (0.7% and

(

217

) Council Recommendation of 8 November 2019 on access to

social protection for workers and the self-employed 2019/C

387/01; Council Recommendation of 30 January 2023 on

adequate minimum income ensuring active inclusion 2023/C

41/01.

(

218

) 2024 Ageing Report

–

Country Fiche for Bulgaria.

(

219

) Ministry of Labour and Social Policy, Analysis of the

Mandatory Pension Insurance, 2024.

kom (2025) 0202 - Ingen titel

1.1% respectively vs 5.5% and 3.3% in the EU). In

addition to the challenges concerning access and

adequacy, LTC provision is also hampered by the

shortage of social care workers, due to factors

such as ageing and emigration. With the overhaul

of social services initiated by the Social Services

Act in 2020, Bulgaria has started to gradually

improve its system in an effort to build up access,

affordability and quality. The ordinance on the

quality of social services (2022) and the national

map of social services (2024), adopted as

commitments under the RRP, will act as the

cornerstones

for

future

investments

accessibility, quality and attractiveness of social

services, but sustained implementation is key.

Furthermore, in March 2024, the 2024-2030

strategy for human resource development in the

social sphere was adopted, aiming to boost staff

qualifications, training, wages and tackle

shortages. Funding from the ESF+, the European

Regional and Development Fund, and the RRF,

together with national co-financing, of EUR 790

million is being channelled towards addressing

issues of quality, access and human resources.

Access to healthcare remains challenging,

notably for vulnerable groups.

The self-

reported unmet need for medical care was 1.1% in

2024, below the EU average of 2.5%, but the

burden falls disproportionately on people in the

lowest income group at 2.7%, compared to 0.3%

in the highest income group, indicating significant

socio-economic disparities in healthcare access.

Vulnerable groups and people living in rural and

remote areas often have limited access to

healthcare services, including specialised care and

emergency services, also due to shortages of

certain medical professionals (see Annex 14).

House prices have been rising significantly

(in 2023 they were up 87% compared to

2015) and are estimated to be slightly

overvalued.

In 2024, house prices showed signs

of acceleration, growing by 16.5% year-on-year in

Q3-2024. They are estimated to be overvalued by

10-15%. In 2023, mortgages grew by 20.5%,

while still at a low level in terms of stock, at

10.8% of GDP. Furthermore, the share of the

population with a mortgage is very low (1.8%). In

terms of financial stability, in February 2024 the

European Systemic Risk Board concluded that the

residential real estate market in Bulgaria was

subject to medium risks and the macroprudential

policy mix was only partially appropriate and

partially sufficient to mitigate the situation (

220

Graph A11.3:

Housing cost overburden 2015-2024

2015

2016

EU27

2017

2018

2019

2020

2021

2022

2023

2024

EU27 (AROP)

BG (AROP)

% of population and % of people in AROP

Source:

Eurostat, [ilc_lvho07a]

Overall housing affordability has improved

amid strong growth of household incomes,

but mounting housing costs and poor housing

conditions still affect households in rural

areas and lower income communities.

The

standardised house price-to-income ratio has been

steadily decreasing over the past decade as house

prices have grown significantly less than

household income. In 2023, it stood at around

60% of its long-term average. The ratio of

dwellings per capita has increased by nearly 20%

since 2015 and is the highest in the EU. This

reflects a dynamic growth of the number of

dwellings while population decreased (‑8% since

2015), though this decline has been slowing down

in the last years. The ratio of house completions

per capita has also increased over the past years

but remains below the EU average. Despite a slight

decrease over the past two years, residential

building permits stand above their pre-pandemic

levels. A large portion of the housing stock (40%)

remains vacant in absence of policies supporting

return of the vacant properties to the market.

Taking into account the cost of mortgage funding,

the borrowing capacity of households improved

significantly over the last ten years as well. While

the rental market is extremely small, the ratio of

new rents to incomes also decreased over the last

decade. In 2024, 8.% of the population faced

housing costs above 40% of their total disposable

household income (net of housing allowances)

below the EU average of 8.2%, it has been

decreasing in recent years, as house prices have

(

220

) ESRB (2024), Follow-up report on vulnerabilities in the

residential real estate sectors of the EEA countries, February

2024.

kom (2025) 0202 - Ingen titel

grown significantly less than household income.

The ratio of new rents to incomes has also

decreased. For people experiencing poverty risks,

this housing cost overburden rate remains close to

four times higher, driven by limited access to

affordable housing. Housing cost overburden rates

are also higher in rural areas than in cities (9.3%

vs %). In 2024, 33.8% of people lived in an

overcrowded household (EU: 16.9%). For people at

risk of poverty, this percentage rose to 42.9% (EU:

28.8%). Despite an improvement of 2.6 pps since

2020, structural deficiencies in dwellings, such as

leaks, damp or rot, affected 8.4% of the Bulgarian

population in 2023. Furthermore, a relatively high

share of the population and specifically those in

poverty lacked access to basic sanitary facilities

such as indoor flushing toilets (7% and 20.6%

respectively in 2020). Despite plans to renovate

the building stock (see energy poverty above),

there is insufficient structural and strategic

planning in the housing sector in terms of

accessibility and affordability and limited

piecemeal social housing projects carried out by

municipalities.

kom (2025) 0202 - Ingen titel

ANNEX 12: EDUCATION AND SKILLS

Low levels of basic skills, inequalities in

education, and limited adult participation in

learning exacerbate skills shortages and

hinder

Bulgaria’s competitiveness.

Rapidly

changing labour market needs, stemming from the

green and digital transitions and other

technological changes, together with Bulgaria’s

shrinking workforce, put pressure on the education

and training systems’

ability

to effectively equip

young people and adults with the relevant skills.

Weaknesses in skills development start at an early

age with low participation of disadvantaged

children in quality early childhood education and

care (ECEC). In addition, around half of 15-year-

olds are failing to meet minimum standards in

basic skills. Strong inequalities in education leave

3 out of 4 disadvantaged pupils without basic

skills, negatively affecting their upskilling

opportunities and employment prospects later in

life. The share of adults engaged in learning

activities is very low. This can be attributed to

limited access to training opportunities, including

online and flexible training, and a lack of

awareness of the value of lifelong learning.

Moreover, higher education and vocational

education and training (VET) do not adequately

respond to labour market needs, leading to skills

mismatches (

221

), exacerbated by a low share of

science, technology, engineering and mathematics

(STEM) graduates and a low level of digital skills.

Major weaknesses in skills development and

human capital formation hinder Bulgaria’s

potential for research and innovation, productivity

growth and competitiveness.

Low participation of disadvantaged children

in quality ECEC impacts foundational

learning and increases inequalities.

In 2022,

enrolment was 87.8% for children aged 3 to the

starting age of compulsory primary education (EU:

93.3%). Substantial efforts were made to improve

participation (

222

), including with funding from the

European Social Fund Plus (ESF+). However, lack of

places still affects large urban areas. Participation

is lower for children from disadvantaged

backgrounds and Roma (58% in 2021 (

223

)), who

stand to benefit the most from quality ECEC. The

government has started integrating nurseries into

the education system and improved the

pedagogical qualifications of childcare staff, but

progress is slow.

Lack of basic skills among young people is

the main barrier to later skills development.

In the 2022 OECD Programme for International

Student Assessment (PISA), 53.6% of Bulgarian

15-year-olds underperformed in mathematics,

52.9% in reading and 48% in science (

224

). These

rates are some of the highest in the EU and

significantly above the EU averages (mathematics:

29.5%, reading: 26.2%, science: 24.2%). Moreover,

38.3% of young Bulgarians underperform

simultaneously in mathematics, reading and

science (EU: 16.1%). This points to challenges

stemming from the school curriculum, teaching

quality and socio-economic factors. Bulgaria has

made efforts to identify and reintegrate out-of-

school children and provided large-scale remedial

education (co-financed by ESF/ESF+) to students

at risk of dropping out. Consequently, early school

leaving dropped to 8.2% in 2024 (EU: 9.3%),

compared to 13.9% in 2019, although it remains

high in rural areas (17.7%) (

225

) and for the Roma.

On the other hand, a strong decline in basic skills

was recorded and is of major concern. Compared

to 2012, low achievement increased by 9.8 pps in

mathematics (EU: 7.3 pps), 13.5 pps in reading

(EU: 8.2 pps) and 11.1 pps in science (EU: 7.4 pps).

These trends show the need for efforts to focus on

educational outcomes, including by evaluating the

effectiveness of the remedial education provided

and expanding support to all those in need.

There are large inequalities in educational

outcomes, leaving significant parts of the

population behind.

Bulgaria has one of the

highest rates of people at risk of poverty or social

exclusion (AROPE) in the EU (see Annex 11). AROPE

rates are more than eight times higher for the

lowest-skilled people than for the highest-skilled

(51.6% vs 6.1% in 2024). This leads to educational

disadvantages for a large share of children and

(

223

) Fundamental Rights Agency, 2022, Headline indicators for

the EU Roma strategic framework for equality, inclusion and

participation for 2020-2030.

(

224

) OECD (2023a), PISA 2022 Results (Volume I):

The State of

Learning and Equity in Education.

(

225

) Compared to 10% in towns and suburbs and 4.2% in cities.

(

221

) The macroeconomic skills mismatch decreased from 20.5%

in 2022 to 19.2% in 2024 (in line with the EU average). It is

measured by an indicator that is based on the dispersion of

employment rates for different skill groups (skills are

represented by the level of education - ISCED).

(

222

) E.g., preschool education for children aged 4-6 is compulsory,

kindergarten fees were eliminated.

kom (2025) 0202 - Ingen titel

students, particularly the Roma, which the

education system struggles to overcome. There is

a high degree of social segregation affecting

schools,

which

exacerbates

learning

disadvantages. 64% of Roma children aged 6-15

attend school where all or most pupils are

Roma (

226

). 62% of students from the poorest

quartile underachieve simultaneously in all three

PISA subjects (EU: 28.8%). These educational

inequalities have negative implications, such as

the lower participation of disadvantaged young

people in higher education and of less qualified

adults in lifelong learning. This leads to worse

employment, career and wage prospects, which

hinders productivity and competitiveness.

The low share of top-performers in basic

skills and creative thinking limits the pool of

innovative talent.

In PISA 2022, very few

Bulgarian students demonstrated advanced skills

in maths (3.1% vs EU 7.9% and 1.4% in science vs

EU 6.9%). Moreover, Bulgarian pupils proved to be

the weakest in the EU in creative thinking with a

top performance rate of only 7.8% (EU-23:

25.1%). These challenges weaken the

country’s

innovation potential. In addition, a lack of

excellence and insufficient competences in maths

and science are some of the key drivers for low

participation in higher education STEM subjects,

alongside poor career guidance.

Bulgaria’s 2016 curricular

reform did not

result in improvements to basic skills.

Bulgaria students tend to score better in

international surveys that take into account the

national curriculum, such as in the TIMMS (Trends

in International Mathematics and Science Study)

(

227

) and PIRLS (Progress in International Reading

Literacy Study) (

228

). By contrast, the PISA survey

assesses how students apply their skills and

knowledge. The effectiveness of the 2016

curricular reform was limited, partly due to a lack

of guidance and support for teachers, insufficient

teacher training, inconsistent implementation

approaches across regions, and an unalignment of

assessment practices (

229

). To improve the

curriculum, Bulgaria is working on refining the

curricular framework for grades 5-7, with EU

support. There are plans for wider curricular

revisions.

Structural challenges for the teaching

profession are reflected in poor levels of

basic skills.

Bulgaria has made major efforts to

improve the attractiveness of the teaching

profession and tackle challenges in the sector, but

there are still major challenges. With Bulgarian

teachers among the oldest in the EU (

230

shortages are emerging, including for subjects

linked to STEM. There is no forecasting of

recruitment needs. Mechanisms to attract highly

qualified teachers to poor performing schools are

insufficient. Despite high interest in teacher

education programmes (

231

), admission criteria are

not

selective

comprehensive.

These

programmes do not generally attract high-

performing upper secondary graduates, and

practical learning during initial teacher education is

limited; large shares of graduates do not enter the

profession (

232

). Drop-out among novice teachers is

high, partly due to insufficient training and

support. Continuous professional development is

not based on a robust assessment of teachers’

training needs. It is fragmented and lacks quality

control (

233

). As a result, making quality

improvements through teaching is challenging.

Dual VET remains underused (at only 9% of VET

students), due to its. The employment rate of

recent VET graduates has dropped to 66.2% in

2024, now 13.8 pps below the EU average, and

nearly half of them (and up to 2/3 in some

regions) do no find employment (

234

). This has a

negative impact on productivity levels. In its 2021-

2030 strategic framework for education and

training, Bulgaria has prioritised VET, and the RRP

is investing in the renovation of and equipment for

VET schools. In addition, the ESF+ supports the

(

229

) OECD (2023b)

Skills Strategy Bulgaria.

(

230

) 49.1% are over 50 (EU 39.8%); 31.4% over 55 (EU 24.8%).

(

231

) In 2023, 14% of bachelor students were pursuing a degree

in education, compared to 11% in 2019.

(

226

) FRA (2021) Roma survey, Figure 15.

(

227

) For example, the average score in mathematics obtained by

Bulgarian fourth graders was above the EU average for the

countries surveyed in 2023 (530 and 512.7, respectively).

(

228

) The average reading score of Bulgarian fourth graders was

540, compared to 527 for the 19 EU countries surveyed in

2021.

(

232

) World Bank (2020),

Bulgaria Teaching Workforce. Policy Note

and Recommendations

and OECD (2023b) Skills Strategy

Bulgaria

(

233

) OECD (2023b) Skills Strategy Bulgaria

(

234

) Bulgarian Institute for Market Economics (2023), Index of the

Correspondence between Vocational Education and

Economic Profiles.

kom (2025) 0202 - Ingen titel

extension of dual VET, the creation of 20 sector

skills councils (which developed a new list of VET

professions) and the implementation of

modernised curricula in 417 VET schools. In the

VET standards developed in 2022 and 2023, there

are mandatory requirements for learning

outcomes relating to the digital and green skills.

Despite these efforts, there is a need for a greater

awareness of dual VET, improved career

orientation for learners, and a stronger role for

social partners and other local bodies in VET (i.e.

employers, trade unions, municipalities, NGOs).

Skills shortages are exacerbated by a

declining number of higher education

graduates.

In 2024, 40.5% of Bulgarians aged

25-34 had a tertiary education degree (EU:

44.21%), with especially low rates among men

(32.2% vs 49.2% for women). Between 2019 and

2023, the percentage of bachelor students

dropped by 12%, caused by demographic trends

and a high proportion of Bulgarians studying

abroad. The number of higher education

professionals is further limited by the fact that

students from poor backgrounds are very under-

represented in higher education (

235

). To meet the

demands of businesses, it is forecasted that

Bulgaria will need over 226 000 specialists with

higher education degrees in the next 3-5

years (

236

). However, the number of new graduates

will be insufficient to meet the new demand. The

most sought-after professional fields are

pedagogy, economics and social activities,

medicine and engineering.

Enrolment in STEM fields is low and

declining.

Despite national efforts, in 2022, only

23.8% of higher education students (ISCED 5-8)

were pursuing a degree in STEM (EU: 27.1%), with

particularly fewer women enrolled. In medium-

level VET in STEM fields, enrolment was higher

than the EU average in 2022: 50.7% vs 36.2% in

the EU. Enrolment in higher education STEM

dropped by 12% between 2017 and 2022.

Nevertheless, enrolments in ICT improved (by

19%). The share of ICT graduates is around the EU

average (4.8%, EU: 4.5%), but numbers are

insufficient to meet the growing demand. Only

3.5% of PhD students are studying ICT (EU: 3.7%).

(

235

) World Bank (2022),

Bulgaria Higher Education: Situation

Analysis and Policy Direction Recommendations

(

236

) National Employment Agency (2024): The Workforce Needs

Survey 2024

Despite some improvements, the alignment

of higher education to labour market needs

still

insufficient,

which

hampers

competitiveness.

Despite policy efforts, higher

education remains insufficiently responsive to

labour market needs, including for the green

transition. Universities are not consistently

equipping graduates with strong transversal

cognitive skills and the practical skills needed by

the labour market, delivering enough graduates or

sufficiently trained professionals in the key areas

of demand. Only 53% of tertiary graduates work

in positions requiring tertiary education (

237

): the

highest unemployment rate is among graduates in

tourism, and the lowest for medicine and

pedagogy. This suggests there is a need to further

improve the labour market relevance and quality

of tertiary education. Bulgaria is implementing

large-scale ESF+ operations to modernise

university curricula, but the need to improve

cooperation with industry remains. ESF+ is also

supporting green skills as a cross-cutting theme in

higher education and VET.

As part of the broader need for upskilling

and reskilling the workforce, developing

green and digital skills is particularly critical.

The country’s economy is highly energy intensive

and is facing a restructuring to decrease

dependence on coal. The needs for reskilling the

workforce are particularly relevant for the regions

with coal mines and coal-fired power plants

(Kyustendil, Pernik and Stara Zagora) where

15 000 jobs will be directly impacted by the green

transition. In 2024, there were already shortages

in occupations requiring specific skills related to

the green transition, including garbage and

recycling collectors, forestry and related workers,

(

238

). At the same time, only 35% of people in

Bulgaria believe that they have the necessary

skills to contribute to the green transition,

significantly below the EU average of 54% (

239

Skills and labour shortages are exacerbated by

very low levels of digital skills. In 2023, only

(

237

) Ministry of Education and Science (2021),

Ranking system of

higher education institutions in Bulgaria.

(

238

) European Labour Authority 2025 EURES Report on labour

shortages and surpluses 2024, based on data from EURES

National Coordination Offices. Skills and knowledge

requirements align with the ESCO taxonomy on skills for the

green transition, with examples analysed using the ESCO

green intensity index.

(

239

) Special Eurobarometer 527.

kom (2025) 0202 - Ingen titel

35.5% of the population aged 16-74 had at least

a basic level of digital skills, still well below the EU

average of 55.6% (see Graph A12.2). The share is

higher among young people (16–24-year-olds) at

53.1% but still low compared to the EU average of

69.9% in 2023. The RRP is funding digital

education infrastructure in schools and investing in

an adult learning platform and digital skills

training. Additionally, ESF+ will support more than

215 000 pupils and students to improve their

digital skills.

Skills

development

crucial

for

competitiveness, resilience and fairness

given the shrinking labour force and skills

shortages.

79% of small and medium-sized

enterprises in Bulgaria cite skills shortages as

hindering general business activities (

240

). In

addition, over 40% of employers report that

applicants do not meet the necessary skills

requirements. Employers in some sectors (e.g.

finance and insurance) report the use of on-the-

job training to tackle skills shortages in newly

employed workers (

241

). Skills intelligence in

Bulgaria involves many activities, such as regular

forecasts by the Ministry of Labour and Social

Policy, skills assessment initiatives, employer

surveys and privately funded sectoral studies.

Nevertheless, turning skills intelligence into skills

development is fragmented. A robust evaluation of

existing measures could enable the government to

allocate or reallocate funding to activities where

returns on investment are the highest.

Furthermore,

effective

governance

and

coordination of skills policies could ensure an

effective response to these challenges. Increased

stakeholder involvement and more evidence-based

policymaking would also be beneficial. With

support from the Technical Support Instrument

(TSI), Bulgaria identified priority policy actions for

the development of an action plan for skills. These

aim to address the fragmented system and the

need to better use the skills available.

Graph A12.1:

Skills development in Bulgaria

2021

2023

2016

2022

Individuals with at least basic digital skills

Adults participating in learning

BG 2030 target

EU 2030 target

(1) % of total population

Source:

Eurostat, tepsr_sp410, Circabc (AES and LFS data)

Low participation in adult learning hinders

the workforce’s ability to adapt to labour

market changes.

In 2022, participation in adult

learning stood at 9.5%, the lowest in the EU and

significantly below the EU average of 39.5% (

242

This was a decline from 11.6% in 2016, widening

the gap with the 2030 national target of 35.4%.

Younger workers (25-34) reported higher levels of

participation (16.9%) than other age groups, as did

those with higher education (20.3%). However, in

both cases, the Bulgarian rate is about one third of

the EU average. Similarly, participation in training

among employed people is the lowest in the EU

(12% vs 44.7%), especially among low-qualified

people. In addition, in 2024, the employment rate

gap between those with the highest and lowest

educational levels was particularly high in Bulgaria

(42 pps vs 27.8 pps in the EU). The low levels of

adult participation in learning indicate the need to

facilitate access to training by: (i) reducing

unnecessary administrative burdens; (ii) increasing

the flexibility of training and schedules, including

online training; (iii) intensifying the dialogue with

social partners on the implementation of effective

measures (such as individual learning accounts

(ILAs)); and (iv) increasing awareness of the

benefits of lifelong learning. A pilot project on ILAs

is planned to run from 2025 to 2027. A working

group on developing the ILA model has been set

up with the participation of stakeholders, including

social partners, but progress appears to be slow.

(

242

) Data from the Adult Education Survey 2022, special

extraction excluding guided-on-the-job training.

(

240

)

Eurobarometer survey

(

241

)

Survey on the needs of employers 2024

kom (2025) 0202 - Ingen titel

ANNEX 13: SOCIAL SCOREBOARD

Table A13.1:Social

Scoreboard for Bulgaria

Social Scoreboard for Bulgaria

Adult participation in learning (during the last 12 months, excl. guided on the job

training, % of the population aged 25-64, 2022)

Early leavers from education and training

(% of the population aged 18-24, 2024)

Share of individuals who have basic or above basic overall digital skills

(% of the population aged 16-74, 2023)

Young people not in employment, education or training

(% of the population aged 15-29, 2024)

Gender employment gap

(percentage points, population aged 20-64, 2024)

Income quintile ratio

(S80/S20, 2024)

Employment rate

(% of the population aged 20-64, 2024)

Unemployment rate

(% of the active population aged 15-74, 2024)

Long term unemployment

(% of the active population aged 15-74, 2024)

Gross disposable household income (GDHI) per capita growth

(index, 2008=100, YYYY)

At risk of poverty or social exclusion (AROPE) rate

(% of the total population, 2024)

At risk of poverty or social exclusion (AROPE) rate for children

(% of the population aged 0-17, 2024)

Impact of social transfers (other than pensions) on poverty reduction

(% reduction of AROP, 2024)

Social protection and inclusion

Disability employment gap

(percentage points, population aged 20-64, 2024)

Housing cost overburden

(% of the total population, 2024)

Children aged less than 3 years in formal childcare

(% of the under 3-years-old population, 2024)

Self-reported unmet need for medical care

(% of the population aged 16+, 2024)

Critical situation

To watch

Weak but

improving

Good but to

monitor

On average

Better than average

Best performers

9.5

8.2

Equal opportunities and access

to the labour market

35.5

12.7

7.2

6.96

76.8

Dynamic labour markets and

fair working conditions

4.2

2.2

30.3

35.1

27.7

35.4

8.0

21.2

1.1

(1) Update of 5 May 2025. Members States are categorised based on the Social Scoreboard according to a methodology agreed

with the EMCO and SPC Committees. Please consult the Annex of the Joint Employment Report 2025 for details on the

methodology (https://employment-social-affairs.ec.europa.eu/joint-employment-report-2025-0).

Source:

Eurostat

kom (2025) 0202 - Ingen titel

ANNEX 14: HEALTH AND HEALTH SYSTEMS

Bulgaria’s health system faces significant

challenges. These need to be addressed if the

country is to improve the health of its

population and social fairness, while

boosting the competitiveness of its economy.

Challenges include low life expectancy, resulting

from high preventable and treatable mortality, and

limited access to care. These issues are mainly

caused by: (i) suboptimal funding and cost-

effectiveness of the health system; (ii) an

insufficient focus on disease prevention and

outpatient care; (iii) shortages of healthcare

workers; and (iv) an uneven geographical

distribution of healthcare resources.

Graph A14.1:

Life expectancy at birth, years

which aim to reduce the burden of cancer, such as

EUnetCCC (the European Comprehensive Cancer

Centre

Network),

JANE-2 (

244

)

and

245

PreventNCD ( ).

The poor health outcomes negatively affect

Bulgaria’s workforce, productivity and

competitiveness.

Cancer in particular has a

major impact on workforce participation and

productivity (

246

). In Bulgaria, mortality at working

age as a proportion of total mortality is among the

highest in the EU, exacerbating the effects of

population ageing on a shrinking labour force (see

Annex 10).

Between 2022 and 2040, Bulgaria’s

working age population is forecast to shrink by

0.9% every year (EU: 0.3%).

Graph A14.2:

Treatable mortality

81.3

75.1

80.4

73.3

80.1

71.2

80.6

74.2

81.4

75.8

per 100 000 population

188.3

2019

2020

2021

Bulgaria

2022

2023

189.0

89.2

213.0

225.1

194.1

89.7

91.3

91.7

93.3

2018

2019

2020

Bulgaria

2021

2022

Source:

Eurostat (demo_mlexpec)

Life expectancy at birth in Bulgaria

rebounded above its pre-COVID-19 level but

was still one of the lowest in the EU in 2023.

The gender gap in life expectancy is higher than

the EU average. In 2022, treatable mortality was

one of the highest in the EU, suggesting

shortcomings in the effectiveness of the health

system. Moreover, mortality from treatable causes

has increased in Bulgaria over the last 10 years,

increasing to more than twice the EU average.

Diseases of the circulatory system (‘cardiovascular

diseases’) and cancer remain

the leading causes of

death. COVID-19 was the third highest cause of

death.

Standardised

death

rates

from

cardiovascular diseases and COVID-19 were

particularly high in Bulgaria (more than three and

two times the EU average respectively). As a

result, the number of potential productive life

years lost due to non-communicable diseases is

considerably higher than the EU average (2 531

per 100 000 inhabitants vs 1 017) (

243

). Bulgaria

participates in several EU4Health joint actions,

(

243

) Update to 2022 data of analysis presented by Health at a

Age-standardised death rate

(mortality that could be

avoided through optimal quality healthcare)

Source:

Eurostat (hlth_cd_apr)

Health expenditure in Bulgaria is low, as is

the share of health spending covered by

public funds. Bulgaria’s health

system is

strongly hospital centred.

Despite rising

significantly since 2019, health spending per

inhabitant in Bulgaria was one of the lowest in the

EU in 2022, with the largest share going to

hospital services (around 38% of total health

expenditure), and

one of the EU’s lowest shares

going to outpatient care. This, together with one of

the highest numbers of hospital beds in the EU in

2022, illustrates Bulgaria’s strongly hospital-

centred care model. In 2023, the National Health

Insurance Fund (NHIF) reported an increase in

hospitalisations by 11.2% compared to 2022,

(

244

)

JANE-2: Shaping the EU Networks of Expertise on cancer!

(

245

)

JA PreventNCD - Reducing Europe's cancer and NCD burden

through coordinated strategies on health determinants.

(

246

) OECD/European Commission (2025),

EU Country Cancer

Profiles Synthesis Report 2025,

OECD Publishing, Paris.

kom (2025) 0202 - Ingen titel

Table A14.1:Key

health indicators

2019

Cancer mortality per 100 000 population

Mortality due to circulatory diseases per 100 000 population

Current expenditure on health, purchasing power standards, per capita

Public share of health expenditure, % of current health expenditure

Spending on prevention, % of current health expenditure

Available hospital beds per 100 000 population**

Doctors per 1 000 population*

Nurses per 1 000 population*

Mortality at working age (20-64 years), % of total mortality

Number of patents (pharma / biotech / medical technology)

Total consumption of antibacterials for systemic use,

daily defined dose per 1 000 inhabitants****

242.2

1 051.9

1 265

60.6

3.0

717

4.2

4.4

19.9

20.7

2020

245.3

1 119.7

1 470

63.1

2.8

725

4.3

4.2

20.0

22.7

2021

229.4

1 211.0

1 707

65.0

3.9

735

4.3

4.2

19.8

24.4

2022

217.3

1 074.3

1 786

63.5

3.1

764

4.4

4.3

18.7

25.7

2023

n.a.

19.5

26.3

EU average*

(latest year)

234.7 (2022)

336.4 (2022)

3 684.6 (2022)

81.3 (2022)

5.5 (2022)

444 (2022)

4.2 (2022)*

7.6 (2022)*

14.3 (2023)

29 (2023)***

20.0 (2023)

*The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple

average is used based on 2022 (or latest 2021) data except for Luxembourg (2017). Doctors’

density data refer to practising

doctors in all countries except Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data

refer to practising nurses (EU recognised qualification) in most countries except France and Slovakia (professionally active) and

Greece (hospital only). **‘Available hospital beds’ covers somatic care, not psychiatric care. ***The EU median is used for patents.

Source:

Eurostat database; European Patent Office; ****European Centre for Disease Prevention and Control (ECDC) for 2023.

while the trend of very low investment in the

health sector continued (

247

). The number of

hospital discharges per 1 000 inhabitants is one of

the highest in the EU, but the occupancy rate and

the average length of stay are among the

lowest (

248

). This points to a suboptimal use of

resources and suggests room for increasing the

efficiency of care, in particular by improving the

effectiveness of both primary and preventive care,

and access to outpatient care. Public spending as a

proportion of total health expenditure was among

the lowest in the EU in 2022. This translated into

the highest proportion of out-of-pocket payments

for healthcare in the EU (35% in 2022, about 2.5x

the EU average), even though it had decreased

somewhat (from 38% in 2019). In 2022, medical

goods (retail pharmaceuticals and therapeutic

appliances) accounted for almost three quarters

(73%) of all out-of-pocket payments (

249

). In 2024,

the NHIF increased the reimbursement level and

eliminated co-payments for more than 400

medicinal products for the home treatment of

chronic cardiovascular diseases. The aim was not

only to reduce the out-of-pocket payment level,

but also to increase adherence to the prescribed

therapy.

Under the Bulgarian recovery and resilience plan

(RRP), around EUR 287.5 million is planned to be

used for health reforms and related investment.

Six reforms are planned, including an update of

(

247

) On capital formation, see Health at a Glance Europe 2018,

2020, 2022 and 2024.

(

248

) OECD/European Commission (2024),

Health at a Glance:

Europe 2024 - State of Health in the EU Cycle,

p. 201.

(

249

)

Health at a Glance: Europe 2024,

pp. 186-187.

the strategic framework of the health system and

access to health services (set-up and staffing of

outpatient care units). Investments also aim at

modernising hospitals and medical facilities,

emergency communication and air ambulance

services (helicopters).

As regards public health, investment in

disease prevention remains low in Bulgaria.

The share of spending directed at prevention stood

at 3.1% of total spending on health in 2022 -

around half of the EU average. To address the very

high rate of preventable mortality (much higher

than the EU average in 2022), in January 2024

access to certain preventive services was

expanded by the Ministry of Health. This included

medical care for chronically ill patients, regular

breast cancer screening for women aged 45 and

over and annual prostate cancer screening for men

aged 45 and over. Preventable mortality in

Bulgaria is closely linked to environmental factors

such as air pollution (see Annex 7) and behavioural

risk factors. Bulgaria has a low consumption of

fruit and vegetables and one of the lowest levels

of physical activity outside working time of all EU

countries. Both adults and adolescents also report

a high level of alcohol consumption and the

highest smoking rate in the EU (

250

). Moreover, in

2023, the consumption of antibiotics was well

above the EU average, and had further increased

since 2019, despite the recommended national

target (

251

) of a 18% decrease between 2019 and

(

250

)

Health at a Glance: Europe 2024,

Chapter 4.

(

251

) National target set by the Council Recommendation on

stepping up EU actions to combat antimicrobial resistance in

a One Health approach,

2023/C 220/01.

kom (2025) 0202 - Ingen titel

2030. This raises concerns about antimicrobial

resistance.

There are significant challenges in accessing

healthcare, with geographical and income-

related disparities.

Access to care is limited by

suboptimal public funding for outpatient care, high

out-of-pocket payments, insurance coverage gaps,

a system of referral quotas limiting the number of

times a general practitioner can refer patients to a

specialist in a given year, and an uneven

distribution of healthcare resources between

regions and between income-level groups. In 2023

and 2024, the proportion of the Bulgarian

population reporting unmet needs for medical care

was below the EU average (see Annex 11), with

unmet needs primarily due to financial reasons

and travel distances (see also Annex 17).

However, comparatively high unmet needs for

medical examination are still reported in rural

areas, which may also be due to greater shortages

of healthcare workers in some rural areas. Among

people declaring unmet medical needs, the gap

between people below and above the poverty

threshold (defined as 60% of the median

equivalised income) is also higher than the EU

average. A range of measures under the RRP and

the cohesion policy aim to improve access to

healthcare in Bulgaria. These include investments

to: (i) modernise hospitals and medical facilities

that provide paediatric, oncological or psychiatric

care; (ii) set up outpatient care units in remote

areas and underserved regions; and (iii) address

shortages

and

unbalanced

geographical

distribution of healthcare professionals (see also

Annexes 15 and 16).

Persistent shortages of nurses and general

practitioners limit the availability of care in

Bulgaria.

In 2022, the number of practising

nurses per 1 000 population remained among the

lowest in the EU, posing a significant challenge to

the health system and, more broadly, the care

system (see Annex 11). In addition, Bulgaria had a

comparatively low number of nursing graduates in

relation to its population. Moreover, more than

40% of nurses were aged 55 and over and less

than 9% were aged 34 and under in 2023, raising

further concerns about the long-term accessibility

of health services. In the last 10 years, the number

of doctors per 1 000 inhabitants in Bulgaria has

been above the EU average. However, in 2023

over half of them were 55 and over and only 17%

were 34 and under. Moreover, the share of general

practitioners is very low compared to specialists.

The

National Map of the Long-Term Needs of the

Healthcare Sector

adopted in 2022 is part of a key

reform under the RRP aimed at improving the

attractiveness of healthcare professions and

promoting a more balanced distribution of

healthcare professionals across the territory.

Measures include: (i) scholarships; (ii) more

university places; (iii) better remuneration; and (iv)

increased reimbursement by the NHIF, in particular

for medical personnel in hard-to-reach and/or

remote areas. Related measures are also planned

under the European Social Fund Plus.

The potential of Bulgaria’s health system to

drive innovation and foster industrial

development in the EU medical sector seems

to remain largely untapped.

Public and

private (

252

)

investment

Bulgaria’s

pharmaceutical sector in R&D is among the lowest

in the EU. The number of European patents

granted

for

the

combined

areas

pharmaceuticals, biotechnologies and medical

technologies is very low (

253

) and very few clinical

trials are held in Bulgaria (

254

The uptake of e-health and the overall

digitalisation of the health system is slowly

improving with the support of EU funds, yet

it still lags behind other EU countries and is

uneven across the population.

While the shares

of people accessing their personal health records

online and of those using online health services

(excluding

phone)

instead

in-person

consultations further increased in Bulgaria in 2024

compared to 2022, they are far below most other

EU countries. This illustrates the generally low

level of digital literacy in the country (35.5% of

individuals with at least basic digital skills in 2023

vs an EU average of 55.6% - see Annex 12).

Moreover, major differences in the use of these

tools are observed depending on individuals’ socio-

economic background. Investments to boost the

digital transformation of Bulgaria’s health sector

are planned under the cohesion policy 2021-2027

and under the RRP. Measures include rolling out

the National Health Information System and

(

252

) Private: as reported by the members of the European

Federation of Pharmaceutical Industries and Associations:

see

EFPIA.

(

253

) European Patent Office,

Data to download | epo.org.

(

254

) EMA (2024),

Monitoring the European clinical trials

environment,

p. 9.

kom (2025) 0202 - Ingen titel

developing a platform for medical diagnostics. In

2024, a national

strategy

and related action plan

for e-health and the digitalisation of the health

system 2021-2030

were adopted, and the

National Health Information System

in place since

2020 was upgraded with a new feature which

allows the e-health app to notify individuals and

their general practitioners about upcoming

screening exams and vaccinations. Access to the

e-health app has also been simplified with a view

to significantly increasing the number of people

with access to their e-dossiers, and raising

awareness and control over the system.

kom (2025) 0202 - Ingen titel

HORIZONTAL

ANNEX 15: SUSTAINABLE DEVELOPMENT GOALS

This Annex assesses Bulgaria’s progress on

the Sustainable Development Goals (SDGs)

along the dimensions of competitiveness,

sustainability,

social

fairness

and

macroeconomic stability.

The 17 SDGs and their

related indicators provide a policy framework

under the UN’s 2030 Agenda for Sustainable

Development. The aim is to end all forms of

poverty, fight inequalities and tackle climate

change and the environmental crisis, while

ensuring that no one is left behind. The EU and its

Member States are committed to this historic

global framework agreement and to playing an

active role in maximising progress on the SDGs.

The graph below is based on the EU SDG indicator

set developed to monitor progress on the SDGs in

an EU context.

Bulgaria is improving on indicators related to

competitiveness

(SDGs 4, 8 and 9) but still

lags behind the EU average.

On SDG 8 (Decent

work and economic growth), Bulgaria is improving

Graph A15.1:

Progress towards the SDGs in Bulgaria

on the employment rate of people aged 20 to 64,

with an average of 76.8% in 2024 compared to

76.2% in 2023 and compared to the EU average

of 75.8%. Similarly, the rate of young people

neither in employment nor in education and

training (NEET) decreased from 18.1% in 2018 to

12.7% in 2024 (EU average: 11.2%). The long-

term unemployment rate decreased to 2.2% in

2024 close to the EU average of 1.9%. However,

Bulgaria is regressing on indicators related to

decent work, with the in-work at-risk-of-poverty

rate at 11.4% in 2023 compared to 2022 (9.7%)

and the EU average (8.3%). Despite still lagging

significantly behind the EU, Bulgaria has made

some progress on R&D and innovation indicators

(SDG 9), in particular on Gross domestic

expenditure on R&D (from 0.76% in 2018 to

0.79% in 2023, compared to the EU average of

2.22%).

The

indicators

for

sustainable

infrastructure also show a positive trend in 2023,

with 88.6% of households having a high-speed

internet connection, a significant increase from

2019 (65.2%) and above the EU average (78.8%).

For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable

development in the European Union’;

for

details on extensive country-specific data on the short-term progress of Member States:

Key findings

–

Sustainable development

indicators - Eurostat (europa.eu).

A high status does not mean that a country is close to reaching a specific SDG, but signals that it

is doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past

five years. The calculation does not take into account any target values, as most EU policy targets are only valid for the aggregate

EU level. Depending on data availability for each goal, not all 17 SDGs are shown for each country.

Source:

Eurostat, latest update of 28 April 2025. Data refer mainly to the period 2018-2023 or 2019-2024. Data on SDGs may

vary across the report and its annexes due to different cut-off dates.

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Bulgaria is moving away from SDG 4 (Quality

education), for instance on the achievement of 15-

year-olds in mathematics and adult participation

in learning, but 40.5% of the population aged 25

to 34 graduated from tertiary education in 2024,

up from 32.6% in 2019 (EU average: 44.2%). The

Bulgarian Recovery and Resilience Plan (RRP)

includes significant measures to strengthen

education, such as reforms in preschool and school

education and lifelong learning, and learning in the

fields of STEM (science, technology, engineering

and maths).

Bulgaria is improving on several indicators

related to

sustainability

(SDGs 2, 7, 9, 11, 12,

13, 14) but often remains below the EU

average and is moving away from SDGs 6

and 15.

Bulgaria outperforms the EU average

indicators on SDG 14 (Life below water),

particularly improving on Coastal water bathing

sites with excellent water quality (94.6% in 2023

compared to 53.9% in 2018, with the EU average

being 88.8% in 2023). Bulgaria is also improving

on Climate action (SDG 13) even though it remains

below the EU average. Bulgaria needs further

efforts to reach the EU average on the Sustainable

agricultural production indicator (SDG 2). Despite

performing 14% above the EU average on SDG 15

(Life on land), Bulgaria continues to move away in

indicators such as land degradation. In addition,

the country is lagging behind the EU average

regarding sustainable cities and communities (SDG

11), with the recycling rate of municipal waste at

24.6% in 2022 compared to the EU average of

48.2%. Similarly, Bulgaria lags 45.4% behind the

EU average on indicators related to responsible

consumption and production (SDG 12) and remains

slightly below EU average on indicators related to

Clean Water and Sanitation

(SDG 6). Bulgaria’s

RRP includes measures to address some of the

sustainability challenges, such as developing a

framework to deploy renewable energy projects

and promoting sustainable agriculture.

While Bulgaria continues to improve on most

of the SDGs related to

social fairness

(SDGs 1, 3, 5, 7, 8, 10), a significant gap to

the EU average remains on the indicators for

quality education (SDG 4).

There has been an

overall improvement towards SDG 1 (No poverty),

with most indicators showing positive trends.

Bulgaria further reduced its severe material and

social deprivation rate from 22.3% in 2018 to

18% in 2023 (EU average: 6.8%). Another area

where Bulgaria is improving is SDG 5 (Gender

equality), where the share of women in senior

management positions increased to 17% in 2024.

At the same time, the gender employment gap of

7.2% remains below the EU average of 10% in

2023. Bulgaria continues to improve on SDG 7

(Affordable and clean energy), with all indicators

having improved or stalled compared to 2022. The

share of renewable energy in gross final energy

consumption increased from 20.6% in 2018 to

22.5% in 2023. Bulgaria needs to catch up with

the EU average on SDG 3 (Good health and well-

being). The rate of standardised avoidable

mortality per 100 000 workers of 470.7 in 2022 is

almost double the EU average of 257.8 and has

increased compared to 2017. Lastly, Bulgaria is

improving on SDG 10 (Reduced inequalities),

catching up with the EU average. All indicators on

inequalities within the country have improved; for

instance, the income quintile share ratio dropped

from 7.66 in 2018 to 6.61 in 2023, nearing the EU

average of 4.7. The Bulgarian European Social

Fund Plus (ESF+) and RRP include measures to

address most of these challenges. In particular,

the plan contains measures to improve the quality

and effectiveness of education, strengthen the

provision and availability of health services,

improve the minimum income scheme and support

social inclusion.

Bulgaria continues to perform well on

SDG 17 (Partnerships for the goals). It is

stalling

macroeconomic

stability

indicators (SDGs 8 and 16), where the

country still needs to catch up with the EU.

Bulgaria performs 27.8% better than the EU

average on SDG 17 (Partnerships for the goals)

indicators. The Bulgarian debt-to-GDP ratio for

2024 was 24.1%, which is well below the EU

average of 81.%. While the trust in institutions

(SDG 16) increased slightly between 2018 and

2023, the country is lagging the EU average (43%

in Bulgaria compared to 62% EU average on the

Corruption Perception Index for 2024) and the

share of the population with a very good or fairly

good perception of the independence of the justice

system decreased from 34% in 2019 to 24% in

2024. Regarding sustainable economic growth

(SDG 8), the country still needs to catch up with

the EU on real GDP per capita even though the

indicator continued its increase from EUR 9 670 in

2019 to EUR 11 300 in 2024.

As the SDGs form an overarching framework, any

links to relevant SDGs are either explained or

depicted with icons in the other annexes.

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ANNEX 16: CSR PROGRESS AND EU FUNDS IMPLEMENTATION

Bulgaria faces structural challenges in a

wide range of policy areas as identified in

the country-specific recommendations (CSRs)

addressed to the country as part of the

European Semester.

They refer, among other

things, to renewable energy, energy infrastructure

and networks, budgetary framework and fiscal

governance, energy efficiency, labour market

policies, healthcare and poverty and social

inclusion.

The Commission has assessed the 2019-2024

CSRs considering the policy action taken by

Bulgaria to date and the commitments in its

recovery and resilience plan (RRP).

At this

stage, Bulgaria has made

at least ‘some progress’

on 58% of the CSRs (

255

and ‘limited progress’ on

34% (Table A16.2).

EU funding instruments provide considerable

resources to Bulgaria by supporting

investments and structural reforms to

increase competitiveness, environmental

sustainability and social fairness, while

helping to address challenges identified in

the CSRs.

In addition to the EUR 5.7 billion

funding from the Recovery and Resilience Facility

(RRF) in 2021-2026, EU cohesion policy funds (

256

)

are providing EUR 10.7 billion to Bulgaria

(amounting to EUR 12.9 billion with national co-

financing) for 2021-2027 (

257

) to boost regional

competitiveness and growth. Support from these

instruments combined represents around 17.3% of

2024 GDP (

258

). The contribution of these

instruments to different policy objectives is

outlined in Graphs A16.1 and A16.2. This

substantial support comes on top of financing

provided to Bulgaria under the 2014-2020

multiannual financial framework, which financed

projects until 2023 and has had significant

(

255

) 0.03% of the 2019-2024 CSRs have been fully

implemented, 26% substantially implemented, and some

progress has been made on 32%.

(

256

) In 2021-2027, cohesion policy funds include the European

Regional Development Fund, the Cohesion Fund, the

European Social Fund Plus and the Just Transition Fund. The

information on cohesion policy included in this annex is

based on adopted programmes with the cut-off date of 5

May 2025.

(

257

) European territorial cooperation (ETC) programmes are

excluded from the figure.

(

258

) RRF funding includes both grants and loans, where

applicable. GDP figures are based on Eurostat data for 2024.

benefits for the economy and Bulgarian society.

Project selection under the 2021-2027 cohesion

policy programmes has accelerated, while

significant volumes of investment are yet to be

mobilised.

The Bulgarian RRP contains 50 investments

and 47 reforms to stimulate sustainable

growth and reach climate objectives.

A year

before the end of the RRF timespan,

implementation is on its way with 23% of the

funds disbursed, but significantly delayed. At

present, Bulgaria has fulfilled 23% of the

milestones and targets in its RRP (

259

). The

implementation of reforms and investments needs

to urgently accelerate to ensure completion of all

RRP measures by 31 August 2026. The main

bottlenecks related to implementation of EU funds

in Bulgaria are insufficient administrative capacity,

political instability and a lack of effective and

competitive public procurement.

Bulgaria also receives funding from several

other EU instruments,

including those listed in

table A16.1. Most notably, the common

agricultural policy (CAP) provides Bulgaria with an

EU contribution of EUR 5.6 billion under the CAP

strategic plan for 2023-2027 (

260

). Operations

amounting to EUR 523,7 million (

261

) have been

signed under the InvestEU instrument backed by

the EU guarantee, improving access to financing

for riskier operations in Bulgaria.

(

259

) As of mid-May 2025, Bulgaria has submitted one payment

request.

(

260

)

An overview of Bulgaria’s formally approved strategy to

implement the EU’s common agricultural policy

nationally

can be found at: https://agriculture.ec.europa.eu/cap-my-

country/cap-strategic-plans/bulgaria_en

(

261

) Data reflect the situation on 31.12.2024.

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Graph A16.1:

Distribution of RRF funding in

Bulgaria by policy field

people and adults will be included in the labour

market through innovative approaches and

measures.

Other

funds

are

contributing

competitiveness in Bulgaria, for instance

through open calls.

The Connecting Europe

Facility has financed strategic investments, for

example in rail infrastructure, inland waterways

and maritime transport, and the development of

alternative fuel infrastructure, to enhance

connectivity, sustainability, and efficiency within

the Trans-European Transport Network (TEN-T);

energy market integration, decarbonisation of the

energy system and security of energy supply,

including the diversification of natural gas sources

and routes; as well as increasing the capacity,

resilience and security of backbone digital

infrastructure, deploying submarine cables, and

advancing the deployment of 5G in smart

communities. Horizon Europe has supported

research and innovation, from scientific

breakthroughs to scaling up innovations with

Climate, Energy, and Mobility as top priorities for

Bulgaria. In Bulgaria, the Technical Support

Instrument has focused on supporting the

development of the national industrial strategy for

the manufacturing and mining sectors and on the

design of innovative approaches to address

negative demographic trend.

Bulgaria’s RRP also contains ambitious

measures

improve

the

business

environment and competitiveness.

Measures

covered by previous payment requests include:

implementation of a guarantee instrument to

alleviate the challenges faced by businesses in

obtaining credit finance to quickly recover from

the COVID-19 crisis and create opportunities for

business expansion to achieve growth and

sustainable development; initiatives to modernise

teaching tools and enhance learning in the fields

of science, technology, engineering and

mathematics (STEM) in Bulgarian schools and

initiatives to enhance the effectiveness of higher

education across the territory of Bulgaria.

EU funds are playing a significant role in

promoting environmental sustainability and

green transition in Bulgaria during the

current seven-year EU budget (multiannual

financial framework).

Cohesion policy funds are

investing over EUR 3.2 billion in the green

transition. Investment in the energy efficiency of

buildings is expected to benefit to approximately

Green transition

Digital transformation

Smart, sustainable and

inclusive growth

Social & territorial cohesion

Health & resilience

Next generation

(1) Each RRP measure helps achieve the aims of two of the

six policy pillars of the RRF. The primary contribution is shown

in the outer circle, while the secondary contribution is shown

in the inner circle. Each circle represents 100% of the RRF

funds. Therefore, the total contribution to all pillars displayed

on this chart amounts to 200% of the RRF funds allocated.

Source:

European Commission

Graph A16.2:

Distribution of cohesion policy

funding across policy objectives in Bulgaria

Smarter Europe

Greener Europe

Connected Europe

Social Europe

Europe closer to citizens

JTF specific objective

Source:

European Commission

Cohesion policy funds aim to increase the

productivity

and

competitiveness

Bulgarian firms and improve the business

environment.

The

European

Regional

Development Fund (ERDF) supports over 10 500

companies and leverages an additional EUR 1.1

billion in private investment. Small and medium-

sized enterprises lie at the heart of ERDF support

for businesses, and selection procedures align with

Bulgaria’s smart specialisation strategy by region.

In addition, the European Social Fund Plus (ESF+)

is investing more than EUR 1 billion to support

better access to employment, modernise labour

market institutions, and promote life-long learning

and gender-balanced labour market participation.

The ESF+ provides support to train over 212 000

people for the twin transitions, with an additional

161 000 workers to be supported in improving

their digital skills. Nearly 136 000 inactive young

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3 800 homes and to cover 180 000 square metres

of public buildings in urban and rural areas.

Simultaneously, the Just Transition Fund is

assisting Bulgaria by investing in sustainable

energy solutions, training and education, and

diversification of the local economy in three coal-

affected regions: Stara Zagora, Pernik and

Kyustendil. As for the CAP strategic plan, Bulgaria

is using 39% of its rural development budget

(EUR 555 115 007) for environmental objectives,

as well as additional EUR 1 026 590 for eco-

schemes. Interventions aim to increase the area

under organic farming through support for

200 380 hectares, to improve the quality of soil

and water and to support low-intensity agricultural

practices. On-farm investments in existing

irrigation installations will increase potential water

savings to 20% and the reduction in water use to

60% for installations in areas with water bodies

that are not in good condition.

Bulgaria’s RRP has a comprehensive set of

reforms and investments for the green

transition.

Measures in previous payment

requests include reforms to tackle barriers to

energy efficiency investment in multi-apartment

buildings; the liberalisation of electricity markets in

Bulgaria and integration with electricity markets in

neighbouring EU Member States; initiatives to

promote sustainable urban mobility and

investment to increase the use of renewable

energy in final household energy consumption.

Promoting fairness, social cohesion and

improving access to basic services are

among the key priorities of EU funding in

Bulgaria.

For instance, the ERDF and Cohesion

Fund support public services, including the creation

of additional capacity in healthcare facilities to

host an additional 400 000 people a year, and an

additional 53 800 places in education facilities. In

addition, Bulgaria has allocated EUR 632 million

(more than 25% of its total ESF+ resources) to

social inclusion measures, with close to

EUR 137 million to combat child poverty. The

operations strive towards improving the situation

of vulnerable groups, particularly children, older

people, people with a disabilityy and Roma. They

aim at fostering active inclusion and developing

social and health services, including long-term

care. A strong focus has been put on

implementation of the European Child Guarantee,

and actions under the ESF+ aimed at tackling child

poverty are expected to benefit over 200 000

children by 2027. Additionally, the most

disadvantaged groups, living in poverty and social

exclusion, will be supported with 350 000 food

packages annually and hot lunch for about 50 000

vulnerable people every month.

Bulgaria’s RRP contains several reforms and

investments related to fairness and social

policies.

These include social inclusion initiatives

promoting personal mobility and accessibility for

people with permanent disabilities; promotion of

the social economy through assistance for the

development of social and solidarity economy

businesses and organisations, and reforms to the

minimum income system. To help Bulgaria

implement its RRP, in 2024 the TSI assisted with

measures to raise the quality of early childhood

education and care and reform educational

curriculum to ensure quality and excellence.

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Table A16.1:Selected

EU funds with adopted allocations - summary data (million EUR)

Instrument/policy

RRF grants (including the RepowerEU allocation)

RRF loans

Allocation 2021-2026

5 688.8

Disbursed since 2021 (1)

1 368.9

Disbursed since 2021 (3)

(covering total payments to the

Member State on commitments

originating from both 2014-

2020 and 2021-2027

programming periods)

5 307.8

2 395.7

1 464.2

1 079.3

368.7

54.1

Instrument/policy

Allocation 2014-2020 (2)

Allocation 2021-2027

Cohesion policy (total)

European Regional Development Fund (ERDF)

Cohesion Fund (CF)

European Social Fund (ESF, ESF+) and the Youth Employment

Initiative (YEI)

Just Transition Fund (JTF)

Fisheries

European Maritime, Fisheries and Aquaculture Fund (EMFAF)

and the European Maritime and Fisheries Fund (EMFF)

Migration and home affairs

Migration, border management and internal security - AMIF,

BMVI and ISF (4)

The common agricultural policy under the CAP strategic

plan (5)

Total under the CAP strategic plan

European Agricultural Guarantee Fund (EAGF)

European Fund for Agricultural Development (EAFRD)

7 924.3

3 884.5

2 186.4

1 853.4

10 705.9

5 641.4

1 241.2

2 625.2

1 198.1

80.8

84.9

152.9

Allocation 2023-2027

5 639.9

4 228.3

1 411.6

363.5

105.7

Disbursements under the

CAP Strategic Plan (6)

1 343.2

1 261.2

82.0

(1) The cut-off date for data on disbursements under the RRF is 31 May 2025.

(2) Cohesion policy 2014-2020 allocations include REACT-EU appropriations committed in 2021-2022.

(3) These amounts relate only to disbursements made from 2021 onwards and do not include payments made to the Member

State before 2021. Hence the figures do not comprise the totality of payments corresponding to the 2014-2020 allocation. The

cut-off date for data on disbursements under EMFAF and EMFF is 29 April 2025. The cut-off date for data on disbursements

under cohesion policy funds, AMIF, BMVI and ISF is 5 May 2025.

(4) AMIF - Asylum, Migration and Integration Fund; BMVI - Border Management and Visa Instrument; ISF - Internal Security Fund.

(5) Expenditure outside the CAP strategic plan is not included.

(6) The cut-off date for data on EARDF disbursements is 5 May 2025. The information on EAGF disbursements is based on the

Member State declarations until March 2025. Disbursements for the Direct Payments (EAGF) started in 2024.

Source:

European Commission

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Table A16.2:Summary

table on 2019-2024 CSRs

Bulgaria

2019 CSR 1

Improve tax collection through targeted measures in areas such as

fuel and labour taxes.

Upgrade the State-owned enterprise corporate governance by

adopting and putting into effect the forthcoming legislation.

2019 CSR 2

Ensure the stability of the banking sector by reinforcing supervision

, promoting adequate valuation of assets, including bank collateral

, and promoting a functioning secondary market for non-performing

loans.

Ensure effective supervision and the enforcement of the AML

framework.

Strengthen the non-banking financial sector by effectively enforcing

risk-based supervision

, the recently adopted valuation guidelines

and group-level supervision.

Implement the forthcoming roadmap tackling the gaps identified in

the insolvency framework.

Foster the stability of the car insurance sector by addressing market

challenges and remaining structural weaknesses.

2019 CSR 3

Focus investment-related economic policy on research and

innovation

, transport, in particular on its sustainability

, water, waste and energy infrastructure and energy efficiency,

taking into account regional disparities,

and improving the business environment.

2019 CSR 4

Strengthen employability by reinforcing skills, including digital skills.

Improve the quality, labour market relevance, and inclusiveness of

education and training, in particular for Roma and other

disadvantaged groups.

Address social inclusion through improved access to integrated

employment and social services

and more effective minimum income support.

Improve access to health services, including by reducing out-of-

pocket payments and addressing shortages of health professionals.

Assessment in May 2025

Substantial Progress

Substantial progress

Limited progress

SDG 9, 10, 11

SDG 8

SDG 8, 16

SDG 9

Relevant SDGs

Limited progress

SDG 10, 11

SDG 6, 7, 9, 10,

11, 12, 13

SDG 8, 9

Limited progress

Some progress

SDG 4, 8

Some progress

SDG 4, 8, 10

Some progress

SDG 1, 2, 10

Some progress

SDG 1, 2, 10

Limited progress

SDG 3

(Continued on the next page)

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Table (continued)

2020 CSR 1

In line with the general escape clause, take all necessary measures

to effectively address the pandemic, sustain the economy and

support the ensuing recovery. When economic conditions allow,

pursue fiscal policies aimed at achieving prudent medium-term fiscal

positions and ensuring debt sustainability, while enhancing

investment.

Mobilise adequate financial resources to strengthen the resilience,

accessibility and capacity of the health system, and ensure a

balanced geographical distribution of health workers.

2020 CSR 2

Ensure adequate social protection and essential services for all

Limited progress

Not relevant anymore

SDG 8, 16

Limited progress

Some progress

SDG 3

SDG 1, 2, 10

and strengthen active labour market policies.

Improve access to distance working

and promote digital skills

Some progress

SDG 8

SDG 4

and equal access to education.

Address the shortcomings in the adequacy of the minimum income

scheme.

2020 CSR 3

Streamline and accelerate the procedures to provide effective

support to small and medium-sized enterprises and self-employed,

also ensuring their continued access to finance and flexible payment

arrangements.

Front-load mature public investment projects

and promote private investment to foster the economic recovery.

Focus investment on the green and digital transition, in particular on

clean and efficient production and use of energy and resources,

environmental infrastructure

and sustainable transport, contributing to a progressive

decarbonisation of the economy, including in the coal regions.

2020 CSR 4

Minimise administrative burden to companies by improving the

effectiveness of public administration

and reinforcing digital government.

Limited progress

SDG 4, 8, 10

Some progress

Substantial progress

SDG 1, 2, 10

SDG 8, 9

Substantial progress

Limited progress

Some progress

SDG 8, 9

SDG 8, 16

SDG 8, 9

SDG 6, 7, 9, 12,

13, 15

SDG 7, 9, 13

SDG 10, 11

Some progress

Limited progress

Some progress

SDG 16

Some progress

SDG 9, 16

Ensure an effective functioning of the insolvency framework.

Step up the efforts to ensure adequate risk assessment, mitigation,

effective supervision and enforcement of the anti-money laundering

framework.

Some progress

SDG 8

Substantial progress

SDG 8, 16

(Continued on the next page)

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Table (continued)

2021 CSR 1

In 2022, pursue a supportive fiscal stance, including the impulse

provided by the Recovery and Resilience Facility, and preserve

nationally financed investment. Keep the growth of nationally

financed current expenditure under control.

When economic conditions allow, pursue a fiscal policy aimed at

achieving prudent medium-term fiscal positions and ensuring fiscal

sustainability in the medium term.

At the same time, enhance investment to boost growth potential. Pay

particular attention to the composition of public finances, on both the

revenue and expenditure sides of the budget, and to the quality of

budgetary measures in order to ensure a sustainable and inclusive

recovery. Prioritise sustainable and growth-enhancing investment, in

particular investment supporting the green and digital transition.

Give priority to fiscal structural reforms that will help provide

financing for public policy priorities and contribute to the long-term

sustainability of public finances, including, where relevant, by

strengthening the coverage, adequacy and sustainability of health

and social protection systems for all.

2022 CSR 1

In 2023, ensure that the growth of nationally financed primary current

expenditure is in line with an overall neutral policy stance, taking into

account continued temporary and targeted support to households

and firms most vulnerable to energy price hikes and to people fleeing

Ukraine. Stand ready to adjust current spending to the evolving

situation.

Expand public investment for the green and digital transitions, and

for energy security taking into account the REPowerEU initiative,

including by making use of the Recovery and Resilience Facility and

other Union funds.

For the period beyond 2023, pursue a fiscal policy aimed at

achieving prudent medium-term fiscal positions.

2022 CSR 2

Not relevant anymore

SDG 8, 16

Not relevant anymore

SDG 8, 16

Not relevant anymore

SDG 8, 16

Not relevant anymore

SDG 8, 16

Not relevant anymore

SDG 8, 16

Not relevant anymore

SDG 8, 16

Not relevant anymore

SDG 8, 16

RRP implementation is monitored by assessing

Proceed with the implementation of its recovery and resilience plan,

RRP payment requests and analysing reports

in line with the milestones and targets included in the Council

published twice a year on the achievement of the

milestones and targets. These are to be

Implementing Decision of 4 May 2022.

reflected in the country reports.

Submit the 2021-2027 cohesion policy programming documents with

Progress on the cohesion policy programming

a view to finalising the negotiations with the Commission and

documents is monitored under the EU cohesion

policy.

subsequently starting their implementation.

2022 CSR 3

Reduce overall reliance on fossil fuels and fossil fuel imports

by accelerating the development of renewables,

and diversify gas supply sources and routes by increasing

interconnections with neighbouring countries.

Step up efforts to reduce energy demand by increasing energy

efficiency in industry and in private and public building stock.

Promote new sustainable solutions in centralised district heating.

2023 CSR 1

Wind down the emergency energy support measures in force, using

the related savings to reduce the government deficit, as soon as

possible in 2023 and 2024. Should renewed energy price increases

necessitate new or continued support measures, ensure that such

support measures are targeted at protecting vulnerable households

and firms, are fiscally affordable and preserve incentives for energy

savings.

Ensure prudent fiscal policy, in particular by limiting the nominal

increase in nationally financed net primary expenditure in 2024 to not

more than 4,6 %.

Preserve nationally financed public investment and ensure the

effective absorption of grants under the Facility and of other Union

funds, in particular to foster the green and digital transitions.

For the period beyond 2024, continue to pursue a medium-term

fiscal strategy of gradual and sustainable consolidation, combined

with investments and reforms conducive to higher sustainable

growth, in order to achieve a prudent medium-term fiscal position.

Limited progress

Some progress

Substantial progress

No progress

No Progress

Some progress

SDG 7, 9, 13

SDG 7

Some progress

SDG 8, 16

Some progress

SDG 8, 16

Limited progress

SDG 8, 16

Substantial progress

SDG 8, 16

(Continued on the next page)

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Table (continued)

2023 CSR 2

Ensure an effective governance structure and strengthen the

RRP implementation is monitored through the

assessment of RRP payment requests and

administrative capacity to allow for a swift and steady

analysis of the bi-annual reporting on the

implementation of its recovery and resilience plan. Swiftly finalise the

REPowerEU chapter with a view to rapidly starting its

achievement of the milestones and targets, to be

implementation. Proceed with the speedy implementation of

reflected in the country reports. Progress with

cohesion policy programmes, in close complementarity and synergy

the cohesion policy is monitored in the context of

the Cohesion Policy of the European Union.

with the recovery and resilience plan.

2023 CSR 3

Reduce reliance on fossil fuels and

accelerate the energy transition through faster deployment of

renewable energy sources, while ensuring storage capacities to

increase the flexibility of the energy system.

Strengthen the electricity grid infrastructure and improve the

management thereof by streamlining the connection procedures and

introducing smart grid elements.

Continue efforts to increase interconnection with neighbouring

countries.

Accelerate building renovation in order to incentivise energy

efficiency and address energy poverty.

Promote new future-proof solutions in district heating and

sustainable urban transport, and accelerate development of railway

infrastructure.

Step up policy efforts aimed at the provision and acquisition of skills

and competences needed for the green transition.

2024 CSR 1

Submit the medium-term fiscal-structural plan in a timely manner.

In line with the requirements of the reformed Stability and Growth

Pact, limit the growth in net expenditure in 2025 to a rate consistent

with, inter alia, maintaining the general government deficit below the

3% of GDP Treaty reference value and keeping the general

government debt at a prudent level over the medium term.

2024 CSR 2

Limited progress

SDG 7, 9, 13

Limited progress

SDG 7, 9, 13

Limited progress

SDG 7, 9, 13

Some progress

Limited progress

No progress

Limited progress

Full implementation

SDG 7, 9, 13

SDG 1, 2, 7, 10

SDG 7

SDG 11

SDG 4

SDG 8, 16

Full implementation

SDG 8, 16

Significantly accelerate the implementation of cohesion policy

programmes and the recovery and resilience plan, ensuring

completion of reforms and investments by August 2026, by improving RRP implementation is monitored through the

assessment of RRP payment requests and

the functioning and boosting the capacity of the public administration,

analysis of the bi-annual reporting on the

including at the regional level, increasing the quality of procurement

achievement of the milestones and targets.

procedures and strengthening the independence and functioning of

regulators. Rapidly finalise the REPowerEU chapter. In the context of Progress with the cohesion policy is monitored in

the context of the Cohesion Policy of the

the mid-term review of cohesion policy programmes, continue

European Union.

focusing on the agreed priorities, while considering the opportunities

provided by the Strategic Technologies for Europe Platform initiative

to improve competitiveness.

2024 CSR 3

Improve education and training, including for disadvantaged groups,

by enhancing teacher training and implementing competence-based

teaching and learning.

Address labour shortages and improve workers’ skills to boost

competitiveness and support the green transition.

2024 CSR 4

Reduce reliance on fossil fuels and accelerate the clean energy

transition, particularly by shifting to renewable energy in district

heating and deploying wind installations. Ensure sufficient storage

capacities to increase the flexibility of the energy system. Strengthen

the electricity grid infrastructure by introducing smart grid elements

and increasing interconnection with neighbouring countries.

Address energy poverty by implementing targeted measures to

reduce the share of population unable to keep their homes

adequately warm.

Promote the deployment and uptake of sustainable urban and railway

transport, including by accelerating the development of the

necessary infrastructure.

Some progress

Limited progress

SDG 4, 10, 8

SDG 8, 4

SDG 7, 8

Limited progress

SDG 7

Limited progress

SDG 11

Limited progress

Source:

European Commission

108

kom (2025) 0202 - Ingen titel

ANNEX 17: COMPETITIVE REGIONS

Regional disparities in terms of GDP per head

remain very high in Bulgaria.

They go hand in

hand with gaps in labour productivity,

demographics,

education

and

training,

employment, wages, infrastructure endowment,

competitiveness and research and innovation

performance. These indicators are all typically

worse in the north of the country. In addition,

Bulgaria continues to experience strong disparities

between the Yugozapaden region, where the

capital Sofia is located and the other regions.

However, there are also strong disparities within

the Yugozapaden region.

GDP (purchasing power standard - PPS) per

head in 2023 varied between 102% of the EU

average in the Yugozapaden region and 41-

54% in all other regions, with one out of the

three Northern and one out of the three

Southern regions at the bottom.

Economic

activity in Bulgaria remains highly concentrated in

the Yugozapaden region which generates about

half of the national GDP. This region's (generally

better) performance is largely driven by that of the

NUTS 3 region of Sofia (137%), whereas the other

NUTS 3 regions within the Yugozapaden region are

largely comparable to the rest of the country.

Graph A17.1:

Labour productivity per hour

2015 EUR per hour worked

2015

Other NUTS 2 regions

Capital region

National average

2022

EU27

2012

2013

2014

2016

2017

2018

2019

2020

Unit: Real GDP per hour worked (EUR, 2015 prices)

Source:

ARDECO (JRC)

Competitiveness

Labour productivity has steadily increased in

Bulgaria since 2010, and more quickly than

the EU average.

Real productivity growth during

2013-2022 was high in all Bulgarian regions.

Yugoiztochen showed the lowest growth in real

productivity per hour worked at 1.5% per year, but

this still exceeds the EU average of 0.9% (Graph

A17.1).

Nevertheless, labour productivity is still

lagging behind the EU average.

In 2022,

Bulgaria had the lowest GDP (PPS) per hour

worked in the EU, equal to around 55% of the EU

average. The country's highest level of labour

productivity is in the Yugozapaden region at 71%,

considerably higher than in Severozapaden,

Severen tsentralen and Yuzhen tsentralen, the

least productive regions, all at 41% of the EU

average. The capital Sofia is home to 20% of the

population, and it is attracting more and more

highly skilled people, providing them with more

opportunities for business development.

Employment

knowledge-intensive

activities and innovative companies has

increased significantly in the country since

2017.

However, employment in high-technology

sectors and R&D expenditure remain very low in

some of the less developed regions. In

Yugoiztochen, Severozapaden and Severoiztochen

only between 1.4% and 2.4% of the workers were

employed in high-technology sectors in 2024. At

national level, R&D expenditure in 2024 was

33.3% of the EU average in the business sector

and 19.7% (

262

) in the public sector, but there are

variations by region. R&D expenditure in 2022 was

between 0.3% and 0.4% of GDP in all regions

except the Yugozapaden region, where it was

much higher at 1.2%.

The ICT uptake remains low in Bulgaria.

2021, only 26.6% of the total population used the

internet to interact with public authorities

compared to the EU average of 58.5%. The

Yugozapaden region had the highest share

(36.3%), while in Severozapaden and Yugoiztochen

the shares were 17.7% and 18.5%, respectively.

Improving the country’s digital infrastructure and

environment can provide opportunities, especially

to young people across the country, to increase the

productivity of local businesses, innovation, and

access to digital services.

Bulgaria has made significant progress in

delivering online services to businesses and

developing digital technologies.

However,

significant challenges persist as regards basic and

(

262

)

European Innovation Scoreboard 2024, Country Profile

Bulgaria.

109

2021

kom (2025) 0202 - Ingen titel

Table A17.1:Selection

of indicators at regional level in Bulgaria

Productivity -

Real

GDP per

productivity Productivity - productivity

GDP per head Real GDP per

person

growth

GDP per hour

growth

(PPS)

head growth

employed

(per person worked (PPS)

(per hour

(PPS)

employed)

worked)

Human

Employment

European

resources in

in knowledge- Quality of

science and

intensive

Government

technology

services

Index (1)

(core)

Population

growth

At-risk-of-

poverty or

social

exclusion

Access to

Greenhouse

alternative fuel

gas emissions

infrastructure

Index

EU-27 = 100

Average

annual

% change

Index

EU-27 = 100

Average

annual

% change

Index

EU-27 = 100

Average

annual

% change

% of total

employment employment

EU-27=0

Average

annual

change

per 1000

residents

2014-2023

1.7

-9.9

-18.6

-17.8

-11.2

-9.3

-4.1

-9.2

% of total

population

Number of

electric vehicles tCO2eq. per

charging points

person

within 10 km

2023

European Union (27 MS)

Bulgaria

Severozapaden

Severen tsentralen

Severoiztochen

Yugoiztochen

Yugozapaden

Yuzhen tsentralen

100

102

2014-2023

1.6

3.7

4.1

4.0

2.9

1.4

4.0

3.8

2023

100

2014-2023

0.6

2.5

4.1

3.2

2.9

1.3

1.4

3.6

2022

100

2013-2022

0.9

2.3

1.9

2.5

2.1

1.5

2.4

3.1

2024

48.3

38.2

30.7

32.2

35.4

30.2

50.1

32.1

2024

41.3

32.3

30.7

24.6

31.0

26.2

40.6

28.0

2024

21.0

30.3

35.8

36.6

26.3

35.8

20.1

38.3

2022

287

3.5

6.7

129

2023

7.1

8.3

8.0

7.0

10.2

19.5

4.9

4.8

-2.42

-0.56

-0.97

-1.33

-1.93

-2.26

(1)

University of Gothenburg

Source:

Eurostat and JRC

advanced digital skills (see also Annex 12) and

closing urban-rural divides. Although it would be

beneficial if Bulgarian firms made progress in the

take-up of advanced digital technologies,

significant progress has been made in developing

strategic technologies such as chips and quantum

computing (

263

). In addition, Bulgaria has advanced

considerably in building competitive capabilities in

green

products,

including

clean-tech

manufacturing over the last two decades (

264

There are opportunities to further accelerate

the implementation of digital and deep-tech

solutions, and clean technologies, which is

important for the long-term sustainability

and competitiveness of Bulgarian regions.

This can be done by: i) investing in research,

development, and manufacturing of critical

technologies, strengthening value chains, and

ii) addressing skills shortages (see Annex 12).

Bulgaria has significant potential to drive

convergence in innovation across regions, by

encouraging

stronger

public-private

collaboration,

strengthening

technology

transfer capacity, and increasing the market

presence of innovative small to medium-

sized enterprises.

With their capacity to drive

regional innovation and create high value added

jobs, the centres of excellence and competence

could play a central role in achieving regional

(

263

)

Bulgaria 2024 Digital Decade country report.

(

264

) Error! Hyperlink reference not valid.

competitiveness and spurring convergence in

innovation across regions.

The key growth prerequisites such as

transport

infrastructure

and

human

capital (

265

) are still lacking in many of the

country’s less developed regions.

In 2024, in

the Severozapaden, Yugoiztochen and Yuzhen

tsentralen regions, less than 30% of people aged

25-64 had a tertiary degree. By contrast, in the

Yugozapaden region the proportion (42.9%) was

higher than the EU average (36.1%). This can be

attributed to more opportunities for studying at

universities in the capital, large differences in

wages, as well as more ample job opportunities in

Sofia for people with a higher education. The

upgrading and modernising of the transport

network is progressing very slowly and needs to be

further developed. In the Yugozapaden region,

74% of the population within a 120 km radius

could be reached in less than 90 minutes by car in

2021. This ratio is considerably lower in the three

northern regions of Severozapaden (30%), Severen

tsentralen (36%) and Severoiztochen (46%).

All Bulgarian regions rank below the EU

average in terms of competitiveness

(Map

A17.1). The Regional Competitiveness Index

(RCI) (

266

) value is highest in the Yugozapaden

(

265

) Human capital encompasses knowledge, skills and

competences, highlighting the importance of education,

training and experience in building a workforce that drives

economic growth, innovation and productivity.

(

266

)

Inforegio - EU Regional Competitiveness Index 2.0 - 2022

edition.

110

kom (2025) 0202 - Ingen titel

region (85) while the lowest values are found in

Severozapaden (49) and Yugoiztochen (53). While

the Yugozapaden region consistently outperforms

the other regions for the various sub-indices of the

RCI, the divide is particularly striking as regards

innovation, where the Yugozapaden region scores

75, compared to only 28 in both Yugoiztochen and

Severozapaden. This is mainly due to the

contribution of the capital city, which offers more

attractive conditions for firms to operate or

develop and for residents to live and work in.

Map A17.1:

Regional Competitiveness Index 2.0,

2022 edition

decreased by only 0.2 per 1 000 residents on

average per year, the index for the regions of

Kyustendil, Pernik and Blagoevgrad

–

18.1, 13.5

and 9.2, respectively

–

is comparable to those in

the northern regions.

The unemployment rate in Bulgaria (4.2%) is

lower than the EU average (5.9%), but there

are wide regional disparities.

In 2024, the

unemployment rate was as low as 2.8% in

Yugozapaden region and 2.9% in Yuzhen

tsentralen, whereas it reached 9.7% in

Severozapaden. The employment rate in this

region is also particularly low, at 69.3% compared

to the national average of 76.8%. This is the

country's least developed region offering limited

opportunities for attractive jobs with sufficient

salaries and business development. Therefore,

highly skilled people are instead moving to the

capital or other regions. Moreover, poverty and

social exclusion risks continue to be high (see

Annex 11), and there are considerable disparities

between rural and urban areas. In 2024, people

living in rural areas were almost twice as likely to

face poverty or social exclusion risks than those

residing in cities (40.8% vs 22.1%).

Bulgarian regions show mixed results in

terms of access to essential services (Graph

A17.2).

The proportion of people in rural areas in

all Bulgarian regions who can access healthcare

services within a 10-minute drive is below the EU

average, ranging from 13% to 25% (EU average:

29%). The rate of early leavers from education

and training is significantly higher in rural areas

(see Annex 12) and the Programme for

International Student Assessment (PISA) test

showed a large performance gap between schools

in rural areas and urban areas (e.g. 79 score points

in mathematics in 2022, EU: 46), reflecting

challenges in accessing quality education and the

impact of socio-economic factors on educational

outcomes. However, better access to essential

services is expected thanks to the completion of

the core or comprehensive parts of the trans-

European Transport network, the improvement of

transportation services, and actions to raise the

quality of education.

Source:

DG REGIO, JRC based on Eurostat

Social fairness

Bulgaria's population, particularly in some of

its less developed regions, is falling rapidly.

Between 2014 and 2023, the country's population

decreased by 9.9 per 1 000 residents on average

per year (

267

). In some regions, the population loss

is extremely high. In Severozapaden and Severen

tsentralen, the population shrank by 18.6 and 17.8

per 1 000 residents, respectively. In comparison,

the population in the Yugozapaden region

decreased by only 4.1 per 1 000 residents in the

same period and the Yugozapaden region was the

only region to show net in-migration, albeit

modest, during this period. Nevertheless, there are

severe intraregional disparities when it comes to

the population of the separate NUTS 3 regions

within the Yugozapaden region. While in the NUTS

3 region of Sofia (capital) the population has

(

267

)

ARDECO (tables: SNPTN, SNPCN, SNMTN).

111

kom (2025) 0202 - Ingen titel

Graph A17.2:

Access to healthcare and primary

education, 2023

EU27

Bulgaria

Yugozapaden

Yuzhen tsentralen

Severozapaden

Severen tsentralen

infrastructure. (

268

)

In 2022, in the Yugozapaden

region, the average number of electric vehicle

charging points within 10

km of people’s homes

was 129, less than half the EU average value of

287, and much lower even in the other regions

(between 4 and 23). Improving access to

alternative fuel infrastructure in urban centres

across the country and introducing more incentives

for buying electric cars could help make mobility

more sustainable and reduce emissions.

Graph A17.3:

Greenhouse gas emissions per capita

Yugoiztochen

Severoiztochen

100

2018

2023

Access to healthcare (% of population)

Access to primary school (% of children under 15 years old)

Units: Percentage of population that can reach nearest

hospital within 10 minutes by car (EU-27).

Percentage of children under 15 who can reach primary

school within 15-minute walk (EU-24).

Source:

Eurostat

Severoiztochen

Severozapaden

Severen tsentralen

Yugozapaden

EU-27

Sustainability

Greenhouse gas emissions per person in

Bulgaria reached 8.3 tonnes per year in

2023, which is above the EU average of 7.1

(Graph A17.3). Moreover, emissions have

decreased by only 4% since 2018, compared to an

EU average decrease of 19%. In the three northern

regions, emissions even increased during this

period. The variation in emissions across regions

continued to be very large in 2023, ranging from

4.8 tonnes per person in Yuzhen tsentralen to 19.5

in Yugoiztochen, where the most polluting mining

industries are located.

The decarbonisation of energy production is

a key regional challenge for Bulgaria.

comes with challenges and opportunities for the

human capital and renewable energies. There are

many ways to tackle some of the challenges faced

by the just transition regions of Stara Zagora,

Kyustendil and Pernik, for example: i) developing

photovoltaic parks with electrolysers and/or energy

storage systems; ii) establishing industrial parks

for clean technologies; iii) creating hydrogen-based

value chains; iv) using green hydrogen.

Bulgarian regions perform relatively poorly

in terms of access to alternative fuel

Unit: Tonnes per person per year

Source:

Eurostat and JRC

(

268

) Indicators of access to alternative fuel infrastructure are

based on calculations by DG REGIO and the JRC, using data

from the European Alternative Fuels Observatory (EAFO),

Eurostat, TomTom and Eco-Movement.

112

Yuzhen tsentralen

Yugoiztochen